'Namyang Dairy M&A' Second Trial... Both Sides Tense Over Trial Delay

[Asia Economy Reporter Kim Daehyun] The appeal trial of the "300 billion won-scale merger and acquisition (M&A) lawsuit" between Hong Wonsik, chairman of Namyang Dairy Products, and the private equity firm Hahn & Company (Hahn & Co) has begun. Hahn & Co's legal representative pointed out that Chairman Hong's side is deliberately delaying the lawsuit, while Chairman Hong's side argued that the delay was an unavoidable measure due to the replacement of the legal team.

On the morning of the 8th, the Seoul High Court Civil Division 16 (Presiding Judges Cha Munho, Lee Yanghee, Kim Kyungae) held the first hearing of the appeal trial regarding the stock transfer lawsuit filed by Hahn & Co against Chairman Hong's family.

On this day, Chairman Hong's side asked the court for understanding regarding the delay in submitting the statement of appeal. They stated, "Unlike the first trial, the delay was unavoidable due to the process of appointing new legal representatives," adding, "The first trial resulted in a 'complete defeat,' and it is necessary to organize the rejected claims."

In response, Hahn & Co stated, "Chairman Hong's side has been delaying the trial since the first trial by postponing the submission of the response and applying for a large number of witnesses, thereby delaying the trial," and "This damages the trust in the private equity fund and causes harm to Namyang Dairy Products." They also emphasized, "We hope the court will appropriately judge this matter and conclude the lawsuit as soon as possible."

The court said, "Previous preparatory orders required the statement of appeal to be submitted to the fullest extent possible by this hearing. If so, there would be no procedural disputes, but it is regrettable that this has not been fulfilled," adding, "The defendant side should submit a sufficiently detailed statement of appeal by the end of this year at the latest." The court also said, "Whether to conduct additional evidence investigation or conclude the trial will be decided at the next hearing," and set the second hearing date for January 12 of next year.

Earlier, Chairman Hong's family signed a stock sales contract on May 27 last year to sell 53.08% of Namyang Dairy Products' shares to Hahn & Co for about 310.7 billion won. After the related details became known, expectations such as the resolution of 'owner risk issues' acted as positive factors, causing Namyang Dairy Products' stock price to soar. Later, Chairman Hong claimed that Hahn & Company did not fulfill the preconditions for the transaction and notified the contract termination on September 1 of the same year.

During the trial, Chairman Hong highlighted the issue of "dual representation." He appointed a lawyer from Kim & Chang as the M&A legal representative based on the sales advisor's suggestion, but since Hahn & Co also appointed another lawyer from Kim & Chang, he argued that the contract was flawed.

He also claimed that the preconditions of the transaction, such as the "spin-off of Baekmidang" and "family privileges," were not met. Chairman Hong argued that the spin-off of Baekmidang and the food service division, which were led by his wife, advisor Lee Woonkyung, and the guarantee of privileges for family members including his two sons who are executives at Namyang Dairy Products, were prioritized conditions that were not fulfilled, which was the reason for halting the sale.

In response, Hahn & Co argued that it is common for one law firm to represent both parties in an M&A, so there is no problem. Regarding the preconditions, they rebutted that Chairman Hong focused on raising the per-share purchase price and did not emphasize conditions such as Baekmidang from the beginning.

The first trial ruled in favor of Hahn & Co, stating that "(both parties') stock sales contract was concluded." It also rejected Chairman Hong's claims regarding "dual representation" and "fulfillment of preconditions."

If the second trial does not accept Chairman Hong's appeal and the judgment is finalized, the major shareholder of Namyang Dairy Products will change from Chairman Hong Wonsik to Hahn & Co. Recently, Hahn & Co separately filed a damage compensation lawsuit worth about 50 billion won against Chairman Hong's family regarding the delayed stock transfer.

Namyang Dairy Products Chairman Hong Won-sik held a public apology press conference regarding the 'Bulgaris incident' on May 4 last year at the Namyang Dairy Products headquarters in Gangnam-gu, Seoul. Photo by Kim Hyun-min kimhyun81@