Chairman Hong Won-sik’s family ordered by court to hand over shares to Hahn & Company.
Namyang Dairy Products’ chairman Hong Won-sik and his family lost their two-year legal battle over the control of the company to private equity firm Hahn & Company.
Seoul Central District Court upheld the original ruling in favor of the plaintiffs in the share transfer lawsuit filed by private equity firm Hahn & Company against Hong and his family on Jan. 4. Consequently, the Hong family has to hand over their controlling stake in the company to Hahn & Company.
Namyang Dairy Products is one of Korea’s largest dairy manufacturers. Hong, the 73-year-old son of the company’s founder, signed a share purchase agreement with Hahn & Company to sell a combined 53.08 percent stake in the company that he and his family members own for 310.7 billion won ($220 million) in May 2021.
The deal was made after the company faced severe public backlash after claiming that its yogurt product Bulgaris could prevent people from catching Covid-19. This claim, which was proven unfounded, led to fluctuations in stock prices, a complaint from the Ministry of Food and Drug Safety, a business suspension, and a police investigation.
As the controversy got out of hand, Hong issued a public apology and announced his resignation as chairman, taking full responsibility for the incident.
Hong signed a share purchase agreement with Hahn & Company following these events but canceled the deal four months later, claiming that Hahn & Company did not comply with the terms of the contract. Hahn & Company filed a lawsuit, demanding Hong and his family to carry out the sales.
The trial court ruled in favor of Hahn & Company. The court stated that the sales agreement is still effective as it found no evidence supporting Hong’s claims about the contract terms.
Hong appealed the ruling, but the court’s final ruling affirmed the trial court’s decision. Once the share transfer takes place, Hahn & Company will take control of the company, effectively ending Namyang’s 60-year family ownership.
