Namyang Dairy Products, South Korea’s third-largest dairy company, is set for a fresh start as its 60-year family ownership comes to an end.
Under new ownership, the company is expected to accelerate new business initiatives, which have been hindered by risks related to poor management such as the controversial Bulgari yogurt scandal.
The Supreme Court upheld a lower court’s decision mandating Namyang Chairman Hong Won-sik and his family to transfer their controlling stake in the company to private equity firm Hahn & Company on Jan. 4. The ruling brought an end to a two-year-long legal battle over the ownership of Namyang Dairy.
The roots of this dispute date back to an incident in 2021 when Hong pledged to resign from his position after the dairy company faced severe public backlash for falsely claiming that its Bulgari yogurt could reduce coronavirus infections by 77.8 percent.
Following this event, he 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.
However, Hong canceled the deal four months later, claiming that Hahn & Company did not comply with the terms of the contract. He alleged that Hahn & Company failed to fulfill certain conditions, including the possibility of leaving Namyang Dairy’s ice cream brand Baekmidang out of the stock acquisition.
Hahn & Company filed a lawsuit, demanding Hong and his family to carry out the sales.
The Supreme Court dismissed Hong’s claims and upheld the lower courts’ rulings, which ordered Hong and his family to sell their shares to Hahn & Company as per the initial agreement. Once the share transfer takes place, Hahn & Company will take control of the company, effectively ending Namyang’s 60-year family ownership.
Namyang Dairy has suffered from a management vacuum and a significant downturn in performance over the past two years as the legal dispute dragged on.
The company’s annual sales, which had initially surpassed $760 million (1 trillion won), dropped to 900 billion won in 2020. The company’s sales have not recovered its 1 trillion won mark ever since. The company’s operating losses exceeded 270 billion won during the same period.
Experts and industry insiders anticipate that Hahn & Company will prioritize governance reforms in the company. “We will develop a management improvement plan to restore consumer trust and create a new Namyang,” Hahn & Company said in a statement.
