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Hong Won-sik, Chairman of Namyang Dairy Products (Photo: Yonhap News) |
[Alpha Biz= Paul Lee] A South Korean court has ordered Hong Won-sik, former chairman of Namyang Dairy Products, to pay KRW 66 billion (approx. USD 50 million) in damages to private equity firm Hahn & Company (Hahn & Co.). The ruling concluded that Hong’s unilateral withdrawal from a share purchase agreement (SPA) delayed the acquisition process and led to a decline in Namyang’s corporate value.
On November 27, the Seoul Central District Court’s Civil Division 31 (Presiding Judge Nam In-su) ruled:
“The defendant, former Chairman Hong, shall pay the plaintiff (Hahn & Co.) damages amounting to KRW 66 billion plus delay compensation. Of this amount, KRW 48.7 billion, classified as ‘passive losses,’ is subject to provisional execution.”
The “passive losses” recognized by the court refer to investment gains Hahn & Co. could have earned had the acquisition proceeded on schedule. Because the SPA’s closing was delayed for 33 months, Hahn & Co. was unable to deploy approximately KRW 300 billion in acquisition funds, and the court acknowledged interest losses based on a commercial statutory rate of 6%.
“Active losses” included the deterioration of Namyang Dairy’s corporate value during the extended acquisition delay caused by Hong’s refusal to execute the SPA.
Hahn & Co. signed an SPA in May 2021 to acquire 53.08% of Namyang Dairy from Hong’s family for KRW 310.7 billion. However, Hong abruptly refused to attend the shareholders’ meeting two months later and subsequently sent a formal notice terminating the agreement in September 2021.
Hahn & Co. initially sought KRW 50 billion in damages, later raising the claim to KRW 93.6 billion as Namyang’s losses accumulated during the prolonged ownership dispute. The court ultimately recognized roughly 70% of the requested amount.
Legal experts say the ruling sets an important precedent regarding damages arising from unilateral delays in M&A contract execution. Although Hong is expected to appeal, the methodology used to calculate losses in this ruling is likely to serve as a reference point in future M&A disputes.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
