The board of Hanmi Science, the holding company of Hanmi Pharmaceutical Group, chose to replace rather than reappoint the CEO of Hanmi Pharmaceutical.
Chair Song Young-sook, spouse of the late founder Im Sung-ki, and Vice Chair Im Joo-hyun, the daughter, had backed professional manager CEO Park Jae-hyun, but Park is stepping down, and Hwang Sang-yeon, head of the private equity (PE) institutional sector at HB Investment, has been tapped as the new professional manager CEO.
On the afternoon of the 12th, Hanmi Science held a board meeting and submitted the agenda to appoint new directors of Hanmi Pharmaceutical, including CEO Hwang Sang-yeon, as a key item for Hanmi Pharmaceutical's regular shareholders meeting.
According to ChosunBiz reporting, during internal discussions within the four-party alliance, Shin Dong-kuk, chair of Hanyang Precision Co. and the largest individual shareholder of Hanmi Science, insisted on replacing the CEO of Hanmi Pharmaceutical. The nomination of Hwang Sang-yeon as Hanmi Pharmaceutical CEO was said to have been proposed by a figure from Chair Shin's side with a background in the securities industry.
A close associate of Chair Shin said of CEO-designate Hwang, "Chair Shin has no personal friendship or ties with him." Another associate on Shin's side noted of the CEO change, "It is a personnel shift to wrap up past factional strife and bring forward a third-party expert instead of existing figures."
But the legal and investment communities see it differently.
That is because this is a CEO appointment card from PE following "conflict between Chair Shin and the founder's mother-daughter family," and "on the last month, Chair Shin's expansion of his Hanmi Science equity through borrowing of about 200 billion won." Analysts said it could be a move that keeps in mind various options such as exiting an investment through future equity transactions.
◇ "Mother and daughter vs. Shin Dong-kuk each stepped back one step"
With this board decision, Hanmi Pharmaceutical's board is expected to change.
At the shareholders meeting of Hanmi Pharmaceutical to be held on the 31st, ▲ Hwang Sang-yeon, head of the private equity (PE) institutional sector at HB Investment, ▲ Kim Na-young, head of new product development at Hanmi Pharmaceutical, ▲ Chae Yi-bae, former lawmaker, and ▲ Han Tae-joon, president of Ghent University Global Campus, are expected to be appointed as new directors.
Of the 10 members of the existing board, four, including professional manager CEO Park Jae-hyun, will be replaced.
There is also a change at the Hanmi Science board. One of the 10 directors will step down, and Kim Nam-gyu, head of La Defense, is expected to be appointed as an other non-executive director of Hanmi Science after its shareholders meeting. Kim Nam-gyu is seen as someone who can provide a check on the Hanmi Science board, where the structure is favorable to Chair Shin. Previously, La Defense formed a four-party alliance with Chair Shin and the mother and daughter (Chair Song Young-sook and Vice Chair Im Joo-hyun) and signed a shareholders agreement that includes a joint exercise of voting rights to defend management control.
A person familiar with the internal affairs of the Hanmi Group boards said, "Chair Shin Dong-kuk's goals through this board and the shareholders meeting were to replace the Hanmi Pharmaceutical CEO and seize control of the board, while the mother and daughter, Chair Song and Vice Chair Im, aimed to secure Park Jae-hyun's reappointment and hold the line at Hanmi Pharmaceutical's board."
The person added, "Looking at the new board composition, both sides only achieved half their goals," and analyzed, "Replacing the CEO is in the direction Chair Shin wanted, but the overall board composition, including the new directors, is not a favorable structure for him."
If the appointment of CEO-designate Hwang is finalized, Hanmi Pharmaceutical will have its first externally recruited CEO in 53 years.
Former and current CEOs who have led Hanmi Pharmaceutical (Lee Kwan-soon, Woo Jong-soo, Kwon Se-chang, and Park Jae-hyun) were internally promoted professional managers who shared the management philosophy of the late founder, Chair Im Sung-ki, and led the company's growth for decades.
With the failure to secure Park Jae-hyun's second term, concern and anxiety are growing inside the company. Park publicly raised issues with Chair Shin's interference in Hanmi Pharmaceutical's management and involvement in the procedures for disciplining a certain executive over sexual misconduct.
An employee of the Hanmi Group said, "In the end, Park's reappointment was blocked as Chair Shin wanted, so I believe Chair Shin will directly and indirectly intervene in management through the new CEO going forward." The employee added, "Already among staff there is talk not only of cutting pharmaceutical costs and reducing research and development (R&D), but also of potentially selling off and winding down affiliates."
◇ Scenario for major shareholder Chair Shin Dong-kuk to recoup his investment?
Behind this reshuffle of Hanmi Pharmaceutical's board lies conflict between Chair Shin Dong-kuk and the founder's mother and daughter.
During the management control dispute within the Hanmi Pharmaceutical founder's family, the mother and daughter, Chair Shin, and La Defense formed a "four-party alliance" and won against the brothers. The four-party alliance signed a shareholders agreement that includes a joint exercise of voting rights to defend management control.
However, when Chair Shin issued exchangeable bonds (EB) last year using his Hanmi Pharmaceutical equity as collateral, a dispute arose over whether this violated the agreement. The mother and daughter argue it is effectively no different from disposing of equity, have filed suit, and have provisionally seized part of Shin's equity and his home.
On the same day, the first hearing was also held at the Seoul Central District Court in the lawsuit filed by the mother and daughter against Chair Shin. Earlier, in Feb., Chair Shin additionally purchased a 6.45% stake in Hanmi Science for 217.3 billion won, raising the combined equity of himself and Hanyang Precision Co. to around 30%. In the process, he also borrowed about 200 billion won in external funds.
With the emergence of CEO-designate Hwang Sang-yeon in this situation, the industry is offering various interpretations. Hwang is a finance and investment expert who served as head of research at Mirae Asset Securities, chief investment officer (CIO) at Allianz Global Investors, and CEO of Chong Kun Dang Holdings. He currently handles private equity investments at HB Investment.
A source in the investment banking (IB) industry said, "When a manager from PE is appointed as a company's CEO, the focus often shifts to financial strategies such as boosting corporate value, improving governance, and investment," adding, "There is widespread interpretation that Shin's side has turned its back on the mother and daughter and is setting a new stage with an exit scenario in mind, such as attracting a strategic investor over the long term or engaging in equity transactions."
However, Chair Shin cautioned against overinterpretation, saying, "It is unrelated to internal conflict within the four-party alliance and the management control dispute." He has also expressed respect for a professional management system.
An industry source interpreted this by saying, "If the management control dispute becomes visible, it will disrupt Shin's exit strategy, including the desired price for equity transactions."