A Seoul court on Thursday ordered Namyang Dairy Products shareholders to sell off its controlling shares to local buyout firm Hahn ＆ Co., brushing off the troubled dairy company’s claims that its stock transfer deal with the private equity fund had been “rigged.”

The Seoul Central District Court sided with Hahn ＆ Co. after the buyout firm last year filed a lawsuit against Namyang shareholders, including its Chairman Hong Won-sik for failing to abide by a binding contract to sell their controlling shares to them for the purpose of apparent rehabilitation.

“We conclude that the Namyang Dairy Products shareholders and owner family must carry out the stock transfer process as stated in the contract,” the court ruled.

The stock transfer deal was signed in late May last year, a few weeks after Namyang received public flak for claiming that its drinking yogurt brand Bulgaris prevented COVID-19 infection. In the same month, Hong pledged to step down from his chairmanship to take responsibility for damaging the company’s reputation and causing stock price fluctuations. Hong, however, remains chairman of Namyang, according to recent regulatory filings.

Hahn ＆ Co. filed a lawsuit against Namyang shareholders including Hong in August last year, after Hong refused to hold up his end of the bargain. Hong claimed that Hahn ＆ Co. failed to uphold its earlier promises of discussing the possibility of leaving Namyang’s ice cream brand Baekmidang out of the stock acquisition as the deal progressed.

But the court did not side with Hong on his claims related to Baekmidang.

Hahn ＆ Co. expressed concerns that the stock transfer deal’s delay had led to not only a deterioration in corporate value, but to damages in the local dairy industry.

“The deal’s delay has inflicted damage on Namyang’s executives and employees, minority shareholders, retail distributors and the local dairy industry,” Hahn ＆ Co. said in a statement released after Thursday’s court ruling.

“We hope Namyang’s shareholders and Hong swiftly uphold their side of the bargain, including stepping down from the chairmanship and transfer of management control, which were pledged in public,” it added.

Meanwhile, Namyang expressed regrets on the latest court ruling in a statement, along with the intention to appeal the ruling.

According to data compiled by Hahn ＆ Co., Namyang posted an operating loss of 19.9 billion won ($14.1 million) in the April-June period this year, performing in the red for 12 consecutive quarters. Hong’s salary, however, came to 811 million won for the first six months of this year.

Shareholders including Hong and Hahn ＆ Co. in May agreed to a sale of the controlling 52.6 percent stake in Namyang Dairy for 310.7 billion won.

(mkjung@heraldcorp.com)