Hahn & Co. set to take over scandal-ridden dairy product-maker for W310.7b

South Korean private equity firm Hahn & Co. is poised to buy a controlling  52.6 percent stake in Namyang Dairy Products which has been under public criticism for claiming that its yogurt drink helps prevent COVID-19, a filing showed Thursday.

Namyang Dairy’s board has agreed to sell 378,938 common shares, owned by ex-chairman Hong Won-sik, his wife and his grandson, to the country’s second-largest private equity firm for 310.7 billion won ($278.2 million), according to the disclosure submitted to the Financial Supervisory Service. Hong’s brother Myeong-sik will remain a minority stakeholder.

The purchase price -- 820,000 won apiece -- is nearly double that of the closing price on Thursday, at 439,000 won each.

Hahn & Co. and Namyang Dairy inked a sales and purchase agreement Thursday, which set the deadline for the deal to close on Aug. 31. The deal will become the first announced acquisition of Hahn & Co. this year, after its takeover of inflight service operations by flag carrier Korean Air in August 2020.

Hahn & Co. said it will focus on improving corporate governance of the beleaguered company. The PEF seeks to disable Namyang Dairy’s board of directors of their authority to make decisions on the execution of company affairs and instead task independent executive directors with business management.

The news comes three weeks after Hong offered to resign from the top post earlier in May and vowed to end dynastic control over the family-owned dairy product maker. An emergency committee forced Hong’s mother and his eldest son out of the board on May 17.

Last month, Namyang Dairy claimed that its yogurt drink Bulgaris showed 78 percent efficacy in preventing COVID-19. The study, conducted by an in-house institute, drew public backlash for causing stock price fluctuations immediately.

Police are investigating the company for allegedly misleading customers and Sejong City’s municipal government has warned Namyang Dairy of a possible two-month business suspension should their investigation prove that they had made exaggerated claims.

By Son Ji-hyoung (consnow@heraldcorp.com)