NPS signals more say in Hanmi Pharmaceutical's family feud

South Korea’s National Pension Service is indicating more active involvement in the management of Hanmi Pharmaceutical Group embroiled in a years-long family feud over management control after changing the purpose of its stake ownership in the country’s major pharmaceutical company.

Korea’s biggest institutional investor announced in a regulatory filing on Monday that it has changed the purpose of its share investment in Hanmi Pharmaceutical Co. (Hanmi Pharm) to “general investment" from “investment-only.”

The NPS, the world’s third-largest pension fund with assets under management of 1,114 trillion won ($840.3 billion), currently holds a 9.43% stake in the pharmaceutical company.

The change has stirred speculation that the Korean pension service is readying to wield more power in the management of Hanmi Pharm, which has been engulfed in a years-long family dispute over management control since the death of founder and late Chairman Lim Sung-ki in 2020.

The founding family’s two sons – Lim Jong-yoon and Lim Jong-hoon, newly elected board members of the pharmaceutical giant’s holding company Hanmi Science Co. – are countering the union of the brothers’ mother, Hanmi Chairwoman Song Young-sook, and their sister Lim Jun Hyun, co-president of Hanmi Pharmaceutical, for management control. 

The company’s extraordinary shareholders’ meeting is expected to be held soon, as Hanyang Precision Co. Chairman Shin Dong-guk, the largest individual shareholder `of the holding company with a 12.43% stake, allied with the mother-daughter union last month called for the meeting to expand Hanmi Science’s board of directors.

Shin sided with the brothers in the previous proxy battle, while the NPS backed the mother and daughter.

The national pension fund declined to comment on the reason for the change in the purpose of its Hanmi Pharmaceutical shareholdings, saying that it is nothing unusual since it frequently changes its share ownership purpose.

THREE TYPES OF SHARE OWNERSHIP

Under Korea’s Capital Markets Act, the NPS and other institutional investors must classify their share ownership purpose based on the level of its interference in the company’s management.

The purpose of “investment-only” indicates more focus on returns with nearly zero involvement in management.

“General investment" guides a more active exercise of shareholders’ rights in the company’s management, while “management participation” suggests far more powerful control of the company management.

The NPS must make it public when it changes the purpose of share ownership.

In November last year, it also changed its stated purpose of stake ownership in Kakao Corp. and its mobile payment service unit Kakao Pay Corp. to “general investment" from “investment-only” amid growing legal risks surrounding their executives.

Hanmi Pharm shares traded down 2% at 289,500 won in morning trade on Tuesday, and Hanmi Science shares fell 1.5% to 31,900 won. 

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Sookyung Seo edited this article.