[Initial Insight] Future Growth Engines, Plausible Lies

Heterogeneous Integration Between OCI and Hanmi Group
An Uncertain Choice to Defend Management Rights

'Unprecedented.'

Experts analyzing corporate governance in the capital market regard the 'inter-group integration' between OCI Group and Hanmi Group as a very unusual and unique case.

Through a major shareholder stake swap, OCI Holdings, the holding company of OCI Group, becomes the largest shareholder of Hanmi Science, the holding company of Hanmi Group, while key shareholders of Hanmi Science become the largest shareholders of OCI Group's holding company. The negotiations were reportedly led by Chairman Lee Woo-hyun of OCI and President Lim Joo-hyun of Hanmi Pharm. The stated purpose was to resolve inheritance tax issues and secure future growth engines through the establishment of an integrated holding company combining different businesses.

What did the negotiation leaders truly gain? We asked an industry insider well-versed in governance analysis. According to him, from the perspective of the Hanmi Pharm founder, despite the children holding many shares, they end up subordinated to others; from the viewpoint of Chairman Lee Woo-hyun’s uncles at OCI Holdings, despite holding more shares than Lee, they lose control of management. In other words, the negotiation leaders allied with outsiders to suppress internal rivals.

Chairman Lee Woo-hyun (6.55%) was able to check his uncles (Lee Hwa-young 7.41%, Lee Bok-young 7.37%) who hold more shares than him by making the major shareholders of Hanmi Group the largest shareholders of OCI Holdings. Having completed all inheritance tax payments last April, Lee currently lacks the financial capacity to buy out his uncles’ shares through block deals. By bringing in his ally, President Lim Joo-hyun, he has temporarily stabilized his somewhat precarious management rights.

President Lim Joo-hyun also caught three rabbits at once. He resolved inheritance tax issues, checked his older brother (12.12%) who holds more shares than himself (7.29%), and for the time being, can maintain management rights under the protection of OCI Group. In the capital market, there is harsh criticism of Lim’s recent moves, saying, "His older brother developed the core Chinese market of Hanmi Group, but Lim took over management rights and, using inheritance tax as an excuse, ultimately handed the company over to others."

Once the deal is completed, OCI Holdings will serve as the holding company of the integrated corporation, and Hanmi Science will act as the intermediate holding company for the pharmaceutical and bio sectors. The market views the long-term outlook as Hanmi Group being absorbed into OCI Group. Whether Shin Dong-guk (12.15%), a close aide of the Hanmi Pharm founder, will ally with his older brother, President Lim Jong-yoon of Hanmi Pharm, remains a variable.

The unexpected moves by major shareholders have unsettled Hanmi Group employees considerably. The stock prices of OCI and OCI Holdings have plummeted. Will the synergy from this cross-industry combination truly be realized? A private equity fund CEO, experienced in mergers and acquisitions (M&A), commented on this group integration, saying, "Even among family members sharing blood, communication, cooperation, and joint management are difficult; cooperation between different companies is even harder." He also expressed concerns that politics might take precedence among employees of both companies, creating an environment where they cannot focus on their core work.

For the time being, even if interests align for joint management, this system cannot last forever. What is truly needed for the long-term growth of both groups is not an ambiguous cross-industry combination (joint management) aimed at defending management rights. To keep pace with global competition in renewable energy and new drug development, it is crucial to create an environment where employees can focus on research, development, innovation, and their work without disruption. Both groups are companies handling core industries essential for national competitiveness. It is necessary to stop the plausible lie of cooperation for securing future growth engines and promptly stabilize corporate governance. The ones who suffer from this well-packaged family feud are minority shareholders and employees.