Lim Jong-yoon "Korea-US OCI Secret Merger Must Convince Shareholders... Urgent Need to Improve Government M&A System"

Lim Jong-yoon, Chairman of the Korea Bio Association, is being interviewed by Asia Economy. Photo by Moon Ho-nam munonam@

On the 15th, the side of Lim Jong-yoon, President of Hanmi Pharm, asserted that "amid the government's move to strengthen board of directors' disclosures on mergers of listed companies, the recent integration process between Hanmi and OCI should also be transparently disclosed."

The government's key points in the corporate M&A system improvement plan include making the disclosure of the 'board of directors' opinion letter' mandatory during the M&A process to enhance the board's accountability, and establishing a 'code of conduct for external evaluation agencies' to ensure fair evaluations by external evaluators.

Explaining this, the Financial Services Commission emphasized, "From the perspective of ordinary shareholders, since M&A significantly impacts corporate equity value, robust protective measures must be established, such as obtaining shareholders' consent during the merger process and granting stock purchase rights to shareholders who do not agree to the merger."

The side of Lim Jong-yoon, President of Hanmi Pharm, stressed that "this government policy direction should also apply to the integration process between Hanmi and OCI."

Lim Jong-yoon's side pointed out, "As shareholders, we cannot agree that the integration decision between Hanmi and OCI was made unanimously by Chairman Song Young-sook, an inside director, and three outside directors who are non-experts in the pharmaceutical field. Apart from the major shareholder's needs for inheritance tax payment, the opinions of ordinary shareholders were thoroughly ignored, and shareholders could suffer serious financial losses."

In fact, it is known that Song Young-sook, Chairman of Hanmi Science, and Lim Joo-hyun, President of Hanmi Pharm, partially acknowledged the aspect of securing funds for inheritance tax in this integration.

The sides of brothers Lim Jong-yoon and Lim Jong-hoon stated, "The fact that the merger and acquisition, which requires a special resolution at the shareholders' meeting, was completed through a bundled transaction by collecting incomplete small contracts without a shareholders' meeting is a serious infringement of rights that ignores the law and all shareholders' voting rights. This shareholder proposal was also aimed at management normalization, ESG restoration, and preventing additional Korea discount under the concept of stewardship."

They also argued that if the integration between Hanmi and OCI is decided, Hanmi Science, the holding company of Hanmi Pharm, will be reduced to an intermediate holding company, which could negatively affect the stock price.

A recent comprehensive survey by Hanul Accounting Corporation on stocks that converted to intermediate holding companies over the past 17 years showed that their PBR was halved.

Hanul Accounting Corporation explained, "If a holding company is incorporated into an intermediate holding company, additional stakeholders such as the top holding company and other affiliates will be involved, which particularly increases doubts among intermediate holding company shareholders regarding dividend-related decisions, potentially causing the stock price to be relatively undervalued."

Lim's side claimed, "Currently, Hanmi Science's PBR is about 3.6 times, which is even higher than the average of 3.55 times for KRX KOSPI healthcare companies. However, if Hanmi Science is reduced to an intermediate holding company of the OCI group during the integration process between Hanmi and OCI Group, the PBR could be discounted to about 50% of the current level."

Professor Lee Sang-hoon of Kyungpook National University Law School emphasized at a National Assembly forum, "Proceeding with mergers and acquisitions without consulting shareholders and not disclosing secret agreements and investment agreements could harm the interests of shareholders and taxpayers."

Lim Jong-yoon's side stated, "Although it will take time until the system is implemented, to prove the legitimacy of this merger as claimed by Hanmi Chairman Song Young-sook's side, it is necessary to undergo verification by a third-party institution. For the shareholders' understanding, the board of directors' opinion letter must be transparently shared."