Namyang Dairy Shares Surge on $22M Shareholder Return Plan

Namyang Dairy (003920) shares surged after the company announced a major shareholder return policy including special dividends and share buybacks with cancellation. The move was interpreted as management's commitment to enhancing corporate value, significantly improving investor sentiment.

According to the Korea Exchange, Namyang Dairy closed at 55,900 won on the 13th, up 9.61% from the previous trading day. The stock rose as high as 57,600 won during intraday trading, recording gains exceeding 10%. Namyang Dairy preferred shares also jumped 13.75% to close at 40,950 won, showing strength even as the broader KOSPI market weakened.

The catalyst for the rally was a 31 billion won ($22 million) shareholder return plan disclosed the previous day. The board decided to propose a dividend plan totaling 11.2 billion won, combining year-end and special dividends, as an agenda item for the annual shareholders' meeting. The market responded to the unusually high dividend payout ratio compared to previous years.

The special dividend was funded by 8.2 billion won in restitution deposits that former Chairman Hong Won-sik's side provided to the company. The amount was deposited during court proceedings where Hong faced charges including embezzlement and breach of fiduciary duty. Namyang Dairy decided to return the entire restitution deposit to shareholders as a special dividend.

Additionally, Namyang Dairy entered into a trust agreement to acquire 20 billion won worth of treasury shares, with plans to cancel all shares acquired through this contract. Treasury share cancellation is considered a key method for enhancing shareholder value as it reduces the number of outstanding shares in circulation, thereby increasing per-share value.

The shareholder return plan is seen as an effort to restore market confidence and normalize the company's undervalued corporate value following the change in management control. Namyang Dairy plans to continue shareholder returns while maintaining a high dividend policy going forward.

Namyang Dairy's largest shareholder is Han & Company, a private equity fund operator. Han & Co. signed a definitive agreement to acquire management control from former Chairman Hong and his family in 2021, but it took time before actually taking over operations. After the contract was signed, Hong's side notified contract termination, leading to years of legal disputes. Han & Co. was finally able to secure management control of Namyang Dairy only in 2024. Han & Co. and Hong's side continue civil and criminal litigation to this day.