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Hanmi Group Chair Song Young-sook and daughter freeze 22 billion won in assets of Chairman Shin Dong-guk; is the 'four-party alliance' falling apart?

[비즈한국] Bizhankook has confirmed that Hanmi Group Chair Song Young-sook, her eldest daughter and Hanmi Group Vice Chair Lim Ju-hyun, and the private equity firm La Defense Partners have recently frozen the stocks and real estate assets of Shin Dong-guk, Chairman of Hanyang Precision, related to Hanmi Science008930. Chairman Shin is the largest shareholder of Hanmi Science, the holding company of Hanmi Group. Last year, during the management dispute with Song's son and daughter, Presidents Lim Jong-yoon and Lim Jong-hoon, Chair Song gained the upper hand by bringing Chairman Shin into her camp. The reason for this asset freeze is presumed to be the "preservation of penalty claims" resulting from a breach of a shareholder agreement. This is a sign that the "four-party alliance" established by Chair Song is beginning to crack.

According to Bizhankook, Killington Ltd., a special purpose vehicle (SPC) for Chair Song Young-sook, Vice Chair Lim Ju-hyun, and private equity firm La Defense Partners, provisionally seized Hanmi Science shares held by Chairman Shin Dong-guk on the 22nd. The intent is to secure 12 billion won out of a 60 billion won penalty claim. Chairman Shin of Hanyang Precision is the largest individual shareholder of Hanmi Science and was appointed as a non-executive director of Hanmi Science at the extraordinary general meeting of shareholders last November.

Prior to this, Chair Song, Vice Chair Lim, and Killington Ltd. also provisionally seized Chairman Shin’s residence, an apartment at Hannam The Hill in Yongsan-gu, Seoul, on the 21st. This was also intended to secure 10 billion won, a portion of the penalty claim. Chairman Shin purchased the apartment, which has a dedicated area of 233㎡, for 6.15 billion won in August 2015. Currently, the market price for the same apartment size is around 10 billion won. Including the stock seizure, Chair Song, Vice Chair Lim, and Killington Ltd. have effectively frozen approximately 22 billion won worth of Chairman Shin’s assets within two days.

The backdrop for freezing Chairman Shin's assets is presumed to be a breach of the shareholder agreement. Shareholders including Chair Song, Vice Chair Lim, Killington Ltd., Chairman Shin, and Hanyang Precision signed a shareholder agreement in November last year and again in January this year. The agreement primarily concerns the parties' agreement to jointly exercise voting rights and board composition, as well as granting other shareholders the right of first refusal when selling shares and tag-along rights to sell shares under the same conditions.

Hanyang Precision Chairman Shin Dong-guk is the largest shareholder of Hanmi Science, holding a 16.43% stake (as of the end of March). Chairman Shin, a hometown junior and high school junior of the late Hanmi Group founder Lim Sung-ki, became the largest individual shareholder after purchasing Hanmi Science shares at the late Chairman Lim's suggestion in 2010. Including Hanyang Precision (6.95%), over which Chairman Shin exercises control, his side's stake reaches 23.38%. Other stakes are held by the owner family (22.84%), including Chair Song (3.38%), Vice Chair Lim (7.57%), and Presidents Lim Jong-yoon (6.8%) and Lim Jong-hoon (5.09%), as well as Killington Ltd. (9.53%).

Chairman Shin was a key figure who determined the outcome of last year's management dispute at Hanmi Group. Chair Song and her daughter, Vice Chair Lim, faced conflict with the Chair's eldest son, President Lim Jong-yoon, and second son, President Lim Jong-hoon, while pursuing a merger between Hanmi Group and OCI Group early last year. The brothers, excluded from the initial merger plan, protested and staged a proxy battle at the shareholders' meeting last March, which they won with the support of the largest individual shareholder, Chairman Shin. However, as opinions regarding investment attraction diverged later, Chairman Shin sided with the mother-daughter duo, and they formed a four-party alliance including La Defense Partners to win the management dispute.

Bizhankook requested a statement from the legal representatives of Chair Song, Vice Chair Lim, and Killington Ltd. regarding the asset freeze, but did not receive a response.