Yoon & Yang benefits from Namyang-Hahn & Co. takeover dispute

Kim & Chang in awkward position

 

The months-long dispute over a 53.08 percent stake Namyang Dairy Chairman Hong Won-sik sought to sell for 310.7 billion won ($265 million) to local private equity fund (PEF) Hahn & Co. is expected to morph into a protracted legal battle, as the PEF hired Yoon & Yang, a law firm specializing in finance and tax litigation, Wednesday.Some market watchers say the private equity has more to gain in a civil suit, since the court is likely to recognize that the sale was in progress, as illustrated by a contract drawn up between the two, as well as the Fair Trade Commission's merger approval and corporate funds prepared for payment upon request.Others say the private equity is being pressured for time, since few investors will consider a drawn-out dispute as competent handling of a high-stakes deal.The announcement of the representation by the law firm with expertise in corporate litigation comes shortly after the disgraced chairman, 71, hired the law firm L.K.B. and Partners in a strategic move to prepare for a countersuit upon a civil claim likely to be filed by the private equity for an incomplete stock purchase agreement (SPA) signed May 27.Some point out that the chairman seeking counsel with L.K.B., which has little experience in mergers and acquisitions (M&A) and is known mostly for taking on politically divisive cases, rather than Kim & Chang, the initial counsel for the takeover deal, is indicative of his desperation to stall the deal as much as possible.Yoon & Yang said the firm isn't in a position to disclose specifics and particulars related to the dispute due to confidentiality issue. "Nothing has been decided at this point," a Yoon & Yang official told The Korea Times by telephone. L.K.B. was not available for comment by deadline.

 

Blame game

Both Hong and the private equity maintain that they hired the law firms for counsel on a broad range of legal issues, not limited to defense strategies. Yet chances are high for them to extend the dispute in court proceedings, if ― or when ― the ongoing exchanges of opinions through intermediaries bear an outcome rejected by both.Industry watchers believe the two have been exchanging opinions since Aug. 17, when Hong issued a statement denying culpability over a delayed meeting between the two, scheduled originally for July 30.The private equity claimed Hong "abruptly and unilaterally" canceled an extraordinary shareholders meeting, shortly after which the two were to finalize the takeover. Hong postponed the meeting to Sept. 14 saying he needed more time, in what the private equity views as no more than a stalling tactic constituting breach of contract.In the statement, Hong said that he had no intention of breaking the deal, refuting claims of a "no-show" raised by the PEF."We informed Hahn & Co. that the deal cannot be inked July 30 as previously set, long before the date of the meeting. The deal cannot be finalized when the parties involved are not ready. It is a simple rescheduling of the date and nothing changed."Hong also refuted the claims of a "no-show," adding that he did attend the extraordinary shareholders meeting to inform other shareholders about his decision to delay the inking of the deal. This is why Hong maintains that he is not at fault for not being present at the place where the two had planned to meet.The claim rebuts the private equity's claim that the meeting of shareholders was "postponed for six weeks due to the unilateral decision of the current major shareholder." It said all measures including legal action will be pursued since this was a "clear violation of the SPA contract."

Change of heart

Most at play is Hong's flip-flopping, driven in part by the dairy giant's share price more than doubling from May to July. The price was 362,500 won on May 4, but it spiked to a high of 813,000 won on July 1.Hong sought to quicken the process in the early stages of takeover talks, in what he believed was an easy out amid the public fury triggered by a firm executive falsely claiming in April that its product helps reduce the likelihood of COVID-19 infection. The executive resigned and Hong held a national press conference May 4 to announce his own resignation.But the firm's share price on a continued rise with the public uproar subsiding, and Hong is seeking ways to strengthen his bargaining power in what he sees as a rash negotiation in hindsight.According to data from the Financial Supervisory Service on the firm's report for the first half of this year, Hong received 808 million won in salary in the period, up over 300 million won from a year earlier. His salary was under 500 million won last year and was therefore not subject to public disclosure.The compensation for the firm's seven board members, three of whom are members of the Hong owner family, averaged 149 million won, up about 50 percent year-on-year from 98 million won.The older of the chairman's two sons recently resumed his role as a managerial figure, May 26, only about a month after he was relieved of his duties following embezzlement suspicions. The younger son was promoted to lead the hospitality business the same day.