Photo: Namyang's symposium in which it made the misleading claim that its yogurt drink cured COVID-19. Credit: Namyang Dairy Products.
Namyang Dairy Products 남양유업, whose president Hong Won-sik 홍원식 agreed to sell to a private equity company in May following a stock pump-and-dump scandal, suddenly pulled out of the deal. (See previous coverage, “Namyang Dairy Sold.”)
On September 1, Hong notified the buyer Hahn & Company 한앤컴퍼니 - which would have paid KRW 311b (USD 278m) for a 53% stake - that the deal was off, claiming the buyer broke the sales agreement. Hahn & Company claimed that there was no breach, as the provisions claimed to be breached were not part of the original sales agreement but additional demands by Hong after the two parties signed the agreement.
Shares of Namyang, which were trading as high as KRW 813k (USD 703) per share on July 1, crashed to KRW 540k (USD 467) when the news broke. Hahn & Company filed suit with the Seoul Central District Court 서울중앙지방법원 on August 23 for a court order enforcing the sales agreement, and won a provisional order that prohibited Hong from selling the shares to anyone else.
Namyang, established in 1964, is South Korea’s first maker of baby formulas. The company was previously facing investigations after claiming in April that its yogurt drink, Bulgaris 불가리스, cured coronavirus, causing its stock to jump by 30% intraday. (See previous coverage, “Namyang Pumps and Dumps.”) On September 2, the police referred four of Namyang’s executives to the Public Prosecutors’ Office 검찰청 on the charges of violating the Act on Labeling and Advertising of Foods 식품위생광고법.
The sale occurred shortly after the police investigation began; market watchers say Hong Won-sik likely began having second thoughts after selling his company under pressure from the investigation.