Namyang Dairy Chairman Hong Won-sik (Yonhap)

An appellate court on Thursday ordered Namyang Dairy Product to sell its controlling stake to private equity firm Hahn & Co. to abide by a binding contract signed by the two in 2021.

The Seoul High Court upheld the lower court's decision in favor of Hahn & Co., dismissing the appeal filed by Namyang Dairy Product Chairman Hong Won-sik, saying it “did not see a reason” to continue the trial.

The court ordered Hong and his family members to hand over 53.08 percent stake in the dairy product manufacturer to the buyout company as stipulated in their contract.

Namyang Dairy Product expressed regret on the court ruling. It said it will take the case to the Supreme Court.

If the Supreme Court upholds lower courts’ decision to wrap up the yearslong legal battle, Hahn & Co. will become largest shareholder of the dairy company after acquiring the stake as it had initially planned.

In August 2021, Hahn & Co. filed a lawsuit against Namyang shareholders for failing to comply with a contract to sell their controlling shares to the company.

Under a share purchase agreement seal by the two companies in May 2021, Namyang Dairy Product agreed to a sale of its 53.08 percent stake for 310.7 billion won ($246 million) to the Seoul-based buyout firm.

The stock transfer deal was made after the dairy company came under fire for claiming its yogurt drink Bulgaris can protect people from COVID-19. The company has been mired in controversies including unfair practices, founding families' illegal drug use, false advertising and more.

Hong pledged to step down from his chairmanship to take responsibility for the controversy.

A few months later, Hong claimed that the deal was invalid, asserting that Hahn & Co. failed to abide by the procedures described in the term sheet, intervening in management before deal closure and breaching the nondisclosure agreement.

Hong also filed a separate lawsuit against Hahn & Co., holding Hahn & Co. accountable for the collapse of the deal. It argued the private equity firm should pay a 30 billion won penalty, 10 percent of the initial deal, to take responsibility for the contract not being carried out as planned. Hong lost the lawsuit in December.

Hahn & Co. expressed concerns that the delay of the stock transfer deal led to a deterioration in the corporate value of Namyang Dairy Product. It also filed a lawsuit against Hong and his family, demanding 50 billion won in damages caused by postponement in closing the deal.