Namyang Dairy Products chairman ordered by court to sell controlling stake in company

Hong Won-sik, chairman of Namyang Dairy Products, walks out of the Seoul Central District Court on Thursday. [NEWS1]

The Seoul Central District Court ruled in favor of Hahn & Company’s lawsuit filed against Namyang Dairy Products’ chairman, ordering the head to sell his controlling stake in the company.

“Namyang Dairy Products shareholders must carry out the stock transfer deal as stated in the contract,” the court ruled Thursday.

Hong Won-sik, chairman of Namyang Dairy Products, signed a share purchase agreement with Hahn & Company to sell a combined 53.08 percent stake in the company that he and related shareholders own for 310.7 billion won ($220 million) in May last year.

The deal was signed after Namyang Dairy Products got caught up in controversy when it claimed Bulgaris, its yogurt drink, could prevent people from getting Covid-19. Following the issue, Hong said he would step down from the chairman position and signed the deal with Hahn & Company.

The chairman and related shareholders canceled the deal in September last year, with Hahn & Company filing a lawsuit demanding the company carry out the sales.

Hong says he canceled the deal because Hahn & Company tried to influence management even though the share sale had not taken place yet.

He also claims the private equity firm promised to split off Baekmidang, an ice cream franchise run by Namyang Dairy Products, and exclude it from the sale in an unofficial agreement, but details weren’t included in the share purchase deal. Appointing Hong as the executive advisor of Namyang Dairy Products after the share sale was also part of the unofficial promise, but also wasn’t included in the deal.

Despite the milk manufacturer’s claims, the court concluded that the sales agreement is still effective and ruled that Chairman Hong and related shareholders must sell their stake in Namyang Dairy Products to Hahn & Company.

Chairman Hong said he plans to immediately appeal the ruling.

Despite Hong trying to fight back, Hahn & Company announced it plans to obtain the 53.08 percent stake as quickly as possible.

“We hope Chairman Hong accepts the court ruling and swiftly transfers the management rights,” Hahn & Company said in a statement Thursday.

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]