OCI·Hanmi Pharm Group Integration... There's a Reason Their Stock Prices Diverge

Hanmi Science Soars Amid Growing Concerns Over Management Dispute
Hanmi Pharm Falls on Fears of Decision-Making Delays
Challenge to Prove Synergy Between Polysilicon and Pharmaceutical Businesses

OCI Holdings is set to become the largest shareholder through the acquisition of existing shares and the subscription of new shares in Hanmi Science. Lim Jong-yoon, president of Hanmi Pharm and eldest son of the late founder Lim Sung-ki, is opposing this move, calling it a unilateral decision by his mother, Chairwoman Song Young-sook, and younger sister, Executive Director Lim Joo-hyun. The financial investment industry views this as increasing the likelihood of a dispute over the management rights of the Hanmi Pharm Group. Opinions on OCI Group within the Yeouido securities community are divided. Some believe it is necessary to wait until synergy effects are proven, while others see it as a positive development given that the cash held is being invested in high-growth new drug development.

According to the financial investment industry on the 16th, Hanmi Science's stock price closed at 43,300 won, up 12.76% from the previous day. Earlier, on the 12th, Hanmi Science announced a third-party allotment paid-in capital increase, issuing 6.43 million new shares to OCI Holdings. The new share issuance price was set at 37,300 won, applying a 0.4% discount compared to the reference price of 37,450 won.

OCI Holdings will also acquire existing shares held by Chairwoman Song, Executive Director Lim Joo-hyun, and the Gahyeon Cultural Foundation. Upon completion of the planned acquisition, OCI Holdings will secure 27.03% (20,651,295 shares) of Hanmi Science, becoming the largest shareholder.

Lee Hee-young, a researcher at Daishin Securities, explained, "Following the passing of Chairman Lim Sung-ki and the inheritance tax issues, conflicts among the Hanmi Science siblings have surfaced," adding, "It is necessary to observe the progress going forward." He further noted, "When Hanmi Pharm Group and OCI Group integrate, we should also watch for specific synergy strategies and research and development (R&D) directions."

President Lim Jong-yoon stated in an interview with the media, "If there is opposition from the major shareholder family, it will be difficult to fulfill the share swap agreement." Lim Jong-yoon, who holds 12.12% of Hanmi Science shares, together with his younger brother Lim Jong-hoon, president of Hanmi Pharm (7.2%), and Shin Dong-guk, chairman of Hanyang Precision (12.15%), could form an alliance that surpasses OCI Holdings' stake.

Park Jae-kyung, a researcher at Hana Securities, also analyzed, "As expectations for a shareholding competition form, stock price volatility may increase," calling it "a highly uncertain issue."

While Hanmi Science's stock price rose amid the growing possibility of a management rights dispute, Hanmi Pharm's stock price fell about 4%. This is believed to reflect concerns that the management dispute could disrupt new drug development amid fierce competition. Lim Jong-yoon is a registered executive of Hanmi Pharm, whereas Chairwoman Song and Executive Director Lim Joo-hyun are not board members. As the management dispute within the owner family becomes apparent, important decisions by Hanmi Pharm's board may be delayed.

OCI Holdings' stock price also dropped 4%. The solar polysilicon and pharmaceutical businesses require specialized expertise, making it unlikely that synergy effects from portfolio integration will be realized in the short term. Jeong Kyung-hee, a researcher at Kiwoom Securities, analyzed, "There is a possibility of capability dispersion due to the Hanmi Science integration in the near term," adding, "It is difficult to expect short-term synergy effects or a reevaluation of the overall corporate value through share integration." She slightly lowered the target price, stating, "The possibility of synergy effects within six months is considered small."

There is also an analysis that this is a positive management decision from a long-term perspective. Han Seung-jae, a researcher at DB Financial Investment, said, "Among non-Chinese polysilicon companies, it has excellent cost competitiveness and high profitability," calling it "a foundation for seizing good M&A opportunities." He added, "They acquired a competitive bio company without a management premium," and "Since the core business remains solid, mid- to long-term growth of the integrated group can be expected."

Unlike analysts covering Hanmi Pharm Group and OCI Group who quickly expressed opinions on the sudden integration announcement, most financial investment industry insiders are withholding judgment. Uncertainty has increased because only some members of the Hanmi Pharm Group owner family participated in the decision-making. Moreover, it is unclear how the symbolic damage to the Hanmi Pharm Group, which grew based on the late Chairman Lim Sung-ki's commitment to new drug development, will affect the stock price. A financial investment industry insider explained, "Hanmi Pharm's stock price surged after a large-scale technology export in 2015," adding, "Considering the rapidly changing new drug development environment, minority shareholders of Hanmi Pharm may express concerns about a joint management system."