Koo Ji-eun, former vice chair of OURHOME, has been notified by Hanwha of the last opportunity to sell her shares. OURHOME, a domestic food ingredient and catering company, was established by the late Koo Ja-hak, who separated it from the GS Retail food service division, growing it to a scale with sales of 2 trillion won. It is an unlisted family company, with Koo Ja-hak's four children (Koo Bon-seong, Koo Mi-hyeon, Koo Myeong-jin, and Koo Ji-eun) sharing ownership.
◇ Koo Ji-eun receives 'last sales opportunity' proposal
According to the investment banking (IB) industry on the 14th, Koo Ji-eun recently received a notice from Koo Mi-hyeon, chair of OURHOME, and Hanwha, asking about the intention to sell 40.27% of her shares in OURHOME. The shares in question include Koo Ji-eun's 20.67% equity and 19.60% owned by Koo Myeong-jin, a former director believed to be aligned with Koo Ji-eun.
The sale condition is set at 65,000 won per share, which is generally consistent with the memorandum of understanding (MOU) previously offered by Hanwha. The sale of equity to Hanwha is being led by Koo Mi-hyeon, the second of Koo Ja-hak's four children, and it has been confirmed that Koo Mi-hyeon is also selling his shares at the same price. Additionally, Koo Bon-seong, a former vice chair, who has already signed an MOU with Hanwha, agreed to sell at 65,000 won per share.
If Koo Ji-eun responds positively to this notice, Hanwha will acquire 100% of the equity in OURHOME. According to the notice, Koo Ji-eun's side must communicate their position on the sale of shares by the 23rd. It is reported that the notice includes the phrase, "This is the last opportunity for sale."
In relation to this, Koo Ji-eun's side was asked for their stance but did not respond.
◇ Reasons Hanwha skipped the right of first refusal, which was seen as a variable
At the end of last year, when Hanwha first ventured to acquire OURHOME, it was widely anticipated that the right of first refusal, as stipulated in OURHOME's articles of incorporation, would be a variable. While Koo Mi-hyeon and Koo Bon-seong were positive about the sale of shares, Koo Ji-eun was known to be negative about selling.
Article 9, Section 3 of OURHOME's articles of incorporation states that if existing shareholders transfer shares, they must first offer to other shareholders on the shareholder list. This means that if Koo Ji-eun can tolerate the price at which Hanwha intends to buy, she can purchase Koo Mi-hyeon's and Koo Bon-seong's shares before Hanwha.
However, in this notice, instead of using the expression 'opportunity for the right of first refusal,' it referred to it as 'the last opportunity for stock sale.' Legal experts explain this indicates that Hanwha believes the opportunity for the right of first refusal has already lapsed. During the signing of the MOU, they clearly outlined the sale price per share and provided ample opportunity to exercise the right of first refusal.
Choi Eun-mi, an attorney at Seodam Law Office, stated, "If there are procedures specified in a separate shareholder agreement for exercising the right of first refusal, the issue would be whether those procedures were followed. However, if no separate procedures were established, it could be determined whether a sufficient period was given for exercising the right of first refusal without intent to obstruct it, or if an excessively inflated price was offered for that purpose." She further noted, "Since at least a month's period was provided, the proposal made by potential buyers seems to present little risk of issues arising."
Nevertheless, Koo Ji-eun's side has maintained that the right of first refusal had not even started until now. A relation of Koo Ji-eun stated prior to receiving the final notice regarding the intention to sell shares, "We were only informed that an MOU was being pursued without having completed due diligence," adding, "We plan to respond adequately once a proper proposal is made and are preparing for various contingencies."
◇ Observing the price and representation guarantees, the IB sector notes Hanwha's significant bet
The price of 65,000 won per share and enterprise value of 1.5 trillion won suggested by Hanwha for OURHOME is regarded as somewhat high. This is compared to competitors such as Hyundai Green Food, CJ Freshway, and Shinsegae Food. The average price-to-earnings ratio (PER) for the last four quarters is around 2.91. However, Hanwha has evaluated OURHOME's PER at approximately 11.0. Furthermore, the stock price proposed by Hanwha is about 1.7 times higher than the value assessed by OURHOME for its own share repurchase (38,000 won).
An IB industry insider noted, "While whether the purchase price is considered cheap or expensive can change depending on performance after acquisition, the sale price has been set higher compared to other listed corporations in the same industry such as Hyundai Green Food and Shinsegae Food."
This is also the case concerning the representations and warranties clause. Representations and warranties refer to provisions in a contract where one party presents certain facts to the other, and if those facts are not true, they are responsible for the guarantees made through the representations.
The talks between Hanwha and Koo Mi-hyeon of OURHOME's management reportedly included provisions for 'anti sandbagging.' Anti sandbagging prevents purchasers from claiming damages regarding facts that were untrue in representations and warranties if they had prior knowledge or were able to foresee them before executing the merger and acquisition (M&A) contract and completing the transaction. This means that even if undisclosed operational flaws of OURHOME are discovered post-acquisition, Hanwha cannot claim damages from OURHOME's shareholders regarding this.
An insider from the IB sector commented, "Typically, if an anti sandbagging clause is inserted, some room for price negotiation should remain, yet the sale price remains fixed while including the anti sandbagging provision. From the seller's standpoint, this does not appear to be a bad situation regarding price or conditions."