Hanmi Pharmaceutical decided to pay cash dividends of 2,000 won per share. The total dividends amount to about 25.4 billion won, the largest since its founding. Backed by earnings growth, the company strengthened its shareholder return policy, and, coupled with recent conflict among major shareholders, the industry is offering varied interpretations.
◇ Subsidiary dividends flow to the holding company… Shin Dong-kuk's cash route
Hanmi Pharmaceutical will hold a regular shareholders meeting on the 31st and is set to give final approval to year-end settlement of account cash dividends of 2,000 won per common share. The total dividends are 25.37822 billion won, the largest ever. The company had maintained dividends of about 500 won per share since 2020, raised them to 1,000 won last year, and doubled the dividends again this year.
Holding company Hanmi Science decided to pay cash dividends of 300 won per common share. The total dividends aggregates about 20.3 billion won, the largest since 2016. With record results last year, observers say the company expanded shareholder returns.
The biggest beneficiaries of the expanded dividends are Hanmi Science and the largest individual shareholder, Hanyang Precision Co. Chairman Shin Dong-kuk. Hanmi Science holds 41.42% equity in Hanmi Pharmaceutical, and its dividend revenue is estimated at about 10.5 billion won.
Chairman Shin is also expected to see a sizable cash inflow. Shin holds 7.72% equity in Hanmi Pharmaceutical, and Hanyang Precision Co. holds 0.95%. The pre-tax dividends Shin will receive total about 1.977 billion won, and Hanyang Precision Co. about 256 million won, bringing the expected dividend revenue to 2.23 billion won in total.
From Hanmi Science, Shin will receive about 3.375 billion won in dividends, and Hanyang Precision Co. about 1.426 billion won, totaling about 4.8 billion won. This was calculated by applying Shin's year-end equity stakes of 16.43% in Hanmi Science and 6.95% in Hanyang Precision Co.
Hanmi Pharmaceutical paid 10.5 billion won in dividends to Hanmi Science, boosting the holding company's capacity to pay dividends, which in turn formed a structure that leads to Shin securing cash in the 7 billion won range.
According to a person familiar with the board's affairs, Hanmi Science Executive Vice President and Chief Financial Officer (CFO) Shim Byung-hwa led the push to expand dividends. Shim, formerly of Samsung Biologics and recommended by Chairman Shin Dong-kuk to introduce a professional management system, is known within the group as part of the "Shin Dong-kuk line."
On the 14th, Shin signed an over-the-counter purchase agreement to increase equity in Hanmi Science. The counterparty was the side of the founder family's eldest son, Im Jong-yoon (executive chair) of Beijing Hanmi Pharmaceutical, and the total acquisition price amounts to 213.7 billion won. Through this, Shin's equity stake will rise by 6.45 percentage points from the end of last year to 22.88%.
The disclosure shows Shin's purchase of about 4.41 million shares will proceed in two tranches. If Shin completes the transaction by the 31st, he can receive an additional roughly 1.3 billion won in dividends. In that case, the dividends Shin receives will reach 8.35 billion won.
◇ Amid cracks in the four-party alliance, a "private equity-style exit" in the works?
Some say Hanmi Pharmaceutical's expanded dividends and personnel moves hint at Chairman Shin Dong-kuk's strategy to recoup his investment.
An investment banking (IB) industry source analyzed, "There is a 'private equity-style exit' strategy at work—raising dividend yields to defend against a share-price decline and boosting operating profit to make the corporations easier to sell."
Since the death of founder and former Chairman Im Sung-ki in Aug. 2020, Hanmi Pharmaceutical Group has faced a management control dispute between mother-and-daughter and the brothers over inheritance tax issues. At the center, the "key man" who decided the outcome of the control battle was Chairman Shin. A junior from the hometown of the late Im Sung-ki, he helped the founder family resolve its inheritance tax problem and, in the process, increased equity—and thus control—in Hanmi Science and Hanmi Pharmaceutical.
In the early stages of the control fight, Shin sided with the brothers (Im Jong-yoon of Beijing Hanmi Pharmaceutical and Im Jong-hoon, inside director at Hanmi Science), then later joined hands with the mother-and-daughter (Song Young-sook, chair of Hanmi Science, and Im Joo-hyun, vice chair of Hanmi Science) to sign a shareholder agreement, forming a four-party alliance.
But recently, cracks have appeared in the alliance. Shin issued exchangeable bonds (EB), using his Hanmi Pharmaceutical equity as collateral last year, fueling further conflict. The mother-and-daughter side filed a lawsuit, arguing it was effectively no different from disposing of equity, and provisionally seized Shin's home and part of his equity. As internal divisions within the four-party alliance surfaced, Shin took on as much as 213.7 billion won in borrowing fund to increase equity. The four-party alliance's contract is reportedly set to expire in 2029.
An IB industry source said, "Shin will use the dividends as ammunition either to service interest or to respond to the ongoing dispute with the mother-and-daughter side," and projected, "If the financial capacity allows, after further increasing equity, there is a possibility of selling the equity—including Hanmi Pharmaceutical's management control—in one block."
On Feb. 12, the Hanmi Science board decided to replace the Hanmi Pharmaceutical CEO instead of extending the term of professional manager CEO Park Jae-hyun. Hwang Sang-yeon, head of the private equity (PE) division at HB Investment, has been nominated as Hanmi Pharmaceutical's next CEO. Hwang, the nominee, is a finance and investment expert who has served as a securities firm research head and an investment chief at a global asset management firm. This is the first time an outsider has been tapped to lead Hanmi Pharmaceutical.
A domestic securities firm's pharma-bio analyst, who requested anonymity, said, "I believe Hanmi Pharmaceutical will tilt further toward a short-term, finance-centered management strategy rather than long-term research and development (R&D) investment."