Cha Partners "Private Equity Funds Should Also Be Checked... Shareholder Proposal for Namyang Minority Shareholders"

Request for Appointment of Auditor, Stock Split, and Cash Dividend at Han & Company
Secured 3% Stake in Namyang Dairy Products Last Year... Agenda to Be Proposed at the General Meeting

Activist fund Cha Partners has now made a shareholder proposal to Namyang Dairy Products. While the stock prices of companies receiving shareholder proposals usually tend to rise, Namyang Dairy Products shows a rather different pattern. Currently, Namyang Dairy Products Chairman Hong Won-sik is engaged in a stock transfer lawsuit with Hahn & Company. Since Hahn & Company has gained the upper hand in both the first and second trials, the market is effectively expecting Hahn & Company to hold control rights. Shareholders seem to be displeased with the appearance of Cha Partners, as they are raising expectations for the new owner, the private equity fund. Since the announcement of the shareholder proposal, Namyang Dairy Products’ stock price has continued to decline.

Hahn & Company Gains Upper Hand in Stock Transfer Lawsuit

On the 28th, Kim Hyung-kyun, Head of the Special Situations Division at Cha Partners, said in a phone interview with Asia Economy, “Just because a private equity fund becomes the controlling shareholder does not necessarily mean the company will improve,” adding, “Checks on private equity funds are also necessary to protect minority shareholders.” Cha Partners has publicly demanded from Namyang Dairy Products ▲share buybacks ▲appointment of auditors ▲stock splits ▲cash dividends. Having secured a 3% stake in Namyang Dairy Products last year, Cha Partners proposed to submit these agenda items to the regular shareholders’ meeting in March and announced its intention to actively engage in shareholder campaign activities.

The shares targeted for buyback by Cha Partners include 50% of the common and preferred shares held by general shareholders. The price is set at 820,000 KRW per share. Considering the current stock price remains in the 500,000 KRW range, this may seem excessively high, but it is the same price calculated when Hahn & Company acquired Chairman Hong Won-sik’s 53% stake in Namyang Dairy Products for a total of 310.7 billion KRW in 2021. Just as the private equity fund Hahn & Company secured the major shareholder Hong’s stake with a control premium, minority shareholders want their shares to be valued at the same price.

Head Kim said, “Since the stock transfer contract between Hahn & Company and Chairman Hong Won-sik has not been finalized, we believe there is no major issue in demanding a public tender offer at 820,000 KRW per share at this point,” adding, “It is necessary to provide minority shareholders with the opportunity to decide whether to trust the new management and invest more or to exit.”

As an auditor candidate, they recommended lawyer Shim Hye-seop, an expert in corporate governance. Since a private equity fund is expected to become the new controlling shareholder, it is necessary to have an auditor who can provide checks on them and enhance the rights of minority shareholders. Head Kim stated, “There are cases where private equity funds damage the value of common shareholders and the company’s value is not properly evaluated,” emphasizing, “Checks to protect the rights of minority shareholders holding about 45% of the shares are essential.”

Demand for Public Tender Offer at 820,000 KRW per Share

Cha Partners also argues that a 5-for-1 stock split and a dividend of 20,000 KRW per common share are necessary to prevent the delisting of preferred shares. Head Kim said, “Since dividends have been stingy, there is a great need for normalization,” emphasizing, “Because increasing dividends could be a burden on the company, the key points in this shareholder proposal campaign are share buybacks, auditor appointments, and stock splits.” He added, “We sent shareholder letters to Chairman Hong and Hahn & Company last month, but have not yet received an official response,” and “If given the opportunity, we plan to discuss with both parties.”