Chairman Hong's Side: "We Will Accept the Supreme Court's Judgment"
[Asia Economy Reporter Kim Daehyun] Han & Company (Han & Co) has won the second trial in the '300 billion KRW-scale M&A lawsuit' against Hong Wonsik, chairman of Namyang Dairy Products, and his family.
On the afternoon of the 9th, the Seoul High Court Civil Division 16 (Presiding Judges Cha Munho, Lee Yanghee, Kim Kyungae) ruled in favor of the plaintiff Han & Co in the appeal trial of the stock transfer lawsuit filed by Han & Co against Chairman Hong and his family, just as in the first trial. The appellate court stated, "After the conclusion of the trial, the defendant (Chairman Hong's family) submitted several requests for reopening the trial, but after reviewing each one in detail, there was no reason to reopen the trial," and dismissed Chairman Hong's appeal.
Immediately after the appellate court's ruling, Chairman Hong's representative said, "We deeply regret that the dispute over the contract's validity due to Han & Co's non-fulfillment of the agreement, dual agency, and breach of fiduciary duty was not sufficiently examined in terms of facts and law," and expressed an intention to immediately appeal to the Supreme Court. However, if the judgments of the first and second trials are upheld by the Supreme Court, Chairman Hong's family will have to transfer their shares of Namyang Dairy Products to Han & Co, and the major shareholder will also change to Han & Co.
Previously, on May 27, 2021, Chairman Hong's family signed a stock sales contract to sell 53.08% of Namyang Dairy Products shares to Han & Co for approximately 310.7 billion KRW. After the details became public, 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 Han & 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 emphasized the issue of 'dual agency.' He argued that although the M&A legal representative was appointed from Kim & Chang law firm based on the sales advisor's suggestion, Han & Co also appointed another lawyer from Kim & Chang, making the contract 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 was actively managed by his wife, advisor Lee Unkyung, 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, Han & Co argued that it is common for one law firm to represent both parties in an M&A, so there was no problem. Regarding the preconditions, Han & Co rebutted that Chairman Hong focused only 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 Han & Co, stating that "(both parties') stock sales contract was concluded." It also rejected Chairman Hong's claims regarding 'dual agency' and 'fulfillment of preconditions.'
Chairman Hong's side filed a penalty lawsuit worth approximately 31.072 billion KRW, claiming responsibility for the M&A failure due to "non-fulfillment of transaction conditions," but also lost in the first trial. Han & Co has separately filed a damage compensation lawsuit worth about 50 billion KRW against Chairman Hong's family regarding the delay in stock transfer.
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