Seoul-based buyout firm Hahn & Co. has filed a lawsuit against Namyang Dairy Products shareholders for failing to abide by a binding contract to sell their controlling shares to them, the nation’s second-largest private equity fund said Monday.
The lawsuit, submitted to the Seoul Central District Court on Aug. 23, is meant to urge shareholders, including Namyang Dairy Chairman Hong Won-sik, to implement the sales deal signed on May 27 as planned, Hahn & Co. said in a statement.
The stock transfer deal was made to allow the private equity fund to take over scandal-ridden Namyang Dairy and to name new board members including Hahn & Co. Chairman Yoon Yeo-eul.
Namyang Chairman Hong, however, failed to hold up his end of the bargain, the private equity company said. The scandal-ridden business magnate was absent on the date of the stock transfer in July and had remained silent until Aug. 17, when he said he was contemplating further on the deal terms, it added.
Hong was under siege for spreading misinformation about its yogurt products’ efficacy in treating COVID-19, which led to an immediate stock price fluctuation. He was also accused of masterminding practices, such as dumping leftover inventory to sales agents and defaming domestic rivals.
In early May, Hong said at a press conference that he would step down from the chairmanship to take responsibility over damaging the dairy company’s reputation and for causing public concern. The deal with Hahn & Co. was announced later that month.
But the latest regulatory filing as of June showed that Hong remained active as chairman and board member of Namyang Dairy.
“A nonchalance will lead to a bad precedent to Korea’s mergers and acquisitions landscape, because it could bring in a culture where deal contracts are taken lightly,” Hahn & Co. said.
Hahn & Co. also revealed in the statement that the proposed sellers have called for a new set of prerequisites to reach a deal close after he broke his silence. Namyang Dairy shareholders responded that Hahn & Co. had breached the nondisclosure obligation.
Shareholders including Hong and Hahn & Co. in May agreed to exchange the controlling 52.6 percent stake in Namyang Dairy for 310.7 billion won ($270.2 million), or the market price plus 87 percent in premium.
Namyang Dairy’s share price fell 1 percent on Monday.
By Son Ji-hyoung (email@example.com