For several years, OURHOME, a foodservice and food ingredients company, has experienced a 'sibling rivalry,' and prospects are emerging that it may soon be embraced by Hanwha Group. This development follows the appointment of Chairman Koo Mi-hyun in June, who set the direction that both equity sales and an initial public offering (IPO) are under consideration. A potential buyer for the equity has also surfaced: Hanwha Group. On the 20th, Hanwha Hotels & Resorts stated regarding the acquisition rumors, "We are examining various institutional sectors, but nothing has been concretely confirmed."
However, if there are disagreements among the shareholders of the family-run OURHOME, finalizing a contract is expected to be challenging. The company's articles of incorporation grant existing shareholders the right of first refusal, and changing this would require a special resolution with the consent of two-thirds of the shareholders. As of June this year, the board of directors is filled with individuals who wish to sell the company, but overcoming the articles of incorporation is not an easy situation.
Investment industry insiders noted that under the current equity structure, for Hanwha to acquire OURHOME, it must consider establishing amicable relationships with shareholders who are reluctant to sell. Otherwise, it would be impossible to avoid disputes over management rights with remaining shareholders after the acquisition.
◇ Hanwha's Kim Dong-seon reviewing acquisition of OURHOME
According to the distribution industry on the 20th, Hanwha Hotels & Resorts is conducting due diligence to acquire management control of OURHOME. This review of acquiring control of OURHOME is reportedly driven by the intent of Kim Dong-seon, the third son of Hanwha Group Chairman Kim Seung-yeon, who oversees Hanwha Galleria and Hanwha Hotels & Resorts' future vision.
The direction Kim envisions involves bringing OURHOME's food service operations into synergy with the food tech business being conducted through Hanwha Hotels & Resorts. Hanwha Hotels & Resorts has been expanding its food tech business, recently unveiling a robotic pasta restaurant, "Pasta X," in Seoul's Hannam-dong, and acquiring the robotic pizza brand "Stella Pizza," while also opening a large-scale research and development (R&D) center in Seongnam, Gyeonggi Province.
Kim is focusing on transforming Hanwha Galleria's business structure, which has centered around department stores, to engage in new business ventures. The performance of Five Guys, a U.S. gourmet burger chain that Kim reportedly led the entry of into the domestic market, is said to be exceeding expectations.
This year marks the first anniversary of Five Guys, which has established four stores in the country that rank among the top 10 in global sales. Recently, they signed a memorandum of understanding (MOU) with the U.S. headquarters to enter Japan in the second half of next year and will open over 20 stores throughout Japan, including Tokyo, over the next seven years.
◇ The greatest hurdle is the shareholders' right of first refusal
However, there are many obstacles before a sale can happen. While former Vice Chairman Koo Bon-sung and Chairman Koo Mi-hyun appear to be active regarding a sale, former Vice Chairman Koo Ji-eun and Koo Myung-jin seem reluctant to sell their equity.
If opinions are not unified, decisions must be made in accordance with the company's articles of incorporation. According to the articles, there is a right of first refusal for existing shareholders when disposing of equity. According to Article 9 (transfer of shares) Section 3 of the 2022 articles of OURHOME, when share transfer occurs, the transferor must give preference to the shareholders listed in the shareholder registry at the time of transfer, based on each shareholder's share ratio. The article also states that "If some shareholders waive their right to purchase shares, the remaining shareholders shall be allocated shares based on their share ratios."
Some interpret that there could be attempts to legally invalidate the articles. There is a possibility that content overly infringing on shareholders' rights, outside the framework of commercial law, might be contested later. However, many believe that there is little room for dispute as this is a common type of article found in family-run corporations.
A lawyer specializing in commercial law said, "In many cases, articles formed by shareholder consent are prioritized over commercial law. Based on the information disclosed so far, there does not seem to be any possibility of breaking the articles through commercial law."
Board approval does not appear to be a stumbling block. In June of this year, Chairman Koo Mi-hyun changed the board structure to three members, all of whom support the sale. The board of directors of OURHOME is composed of Chairman Koo Mi-hyun, her husband Lee Young-yeol, an inside director, and Koo Jae-mo, the eldest son of former Vice Chairman Koo Bon-sung.
◇ Stances on the equity sale among the four siblings
Former Vice Chairman Koo Bon-sung was sentenced to six months in prison and two years of probation for damaging another vehicle and hitting the driver due to road rage in 2021, after which he announced his intention to sell all his holdings and step back from management.
Chairman Koo Mi-hyun, who took over the chairmanship with the support of former Vice Chairman Koo Bon-sung, explicitly mentioned a sale in her inaugural address. In her inaugural remarks, she noted, "We could not overlook the decline in corporate image and growth momentum caused by the ongoing management rights dispute since 2016," adding, "The only fundamental way to end the management rights dispute among shareholders is to transfer management rights to a professional management team that pursues sustainable business development."
Former Vice Chairman Koo Ji-eun is the most vocal opponent of the equity sale. She stated in the preface of her late father Koo Ja-hak's memoir, "The First Is Not Fearful," "While seeking and organizing my father's records, I gained new insights. Only now do I realize that I have finally begun to follow my father's path." Koo Myung-jin, who is married to Chairman Cho Jung-ho of Meritz Financial Group, is known to be on Koo Ji-eun's side. However, she has not clearly expressed her stance on the equity sale.
A lawyer who mainly provides succession consulting said, "Considering the ages and situations of Koo Bon-sung and Koo Mi-hyun, they may have no choice but to maximize equity value and sell. Conversely, the younger Koo Ji-eun and Koo Myung-jin may want to follow their father's will and consider the equity's value later," adding, "However, it will be challenging to maximize the equity value without involving outsiders, which may lead to a greater likelihood of considering a sale as time goes on."
The lawyer continued, "If Hanwha does not consider building amicable relationships with shareholders who do not wish to sell their equity, it will not be able to avoid management disputes with remaining shareholders even after the acquisition," noting, "However, as having over 51% equity will minimize management issues, it seems unlikely that Hanwha will take a loss in a future resale."