South Korea's pharmaceutical industry is undergoing a significant transformation as Hanmi Pharmaceutical Group, a newcomer, emerges as a leader in specialized pharmaceuticals. Making history as the first to engage in large-scale global technology exports in unit quantities, Hanmi celebrated its 50th anniversary with an integration milestone last year. Now joining forces with OCI Group in the material and energy sector, the integration marks a rare occurrence in the South Korean pharmaceutical sector.

On January 12th, Hanmi Pharmaceutical Group and OCI Group announced the signing of an agreement for the 'group integration.' The agreement comprises three main components: Hanmi Sciences equity investment agreement with OCI Holdings issuing new shares, Hanmi Sciences stock acquisition agreement, and new share issuance by Hanmi Sciences, with OCI Holdings acquiring them.

At the pinnacle of the combined group's corporate structure will be OCI Holdings, the holding company of OCI Group, with Hanmi Sciences positioned beneath. In terms of OCI Holdings' shareholder composition, Ju-Hyun Im, the second-generation leader of Hanmi Sciences, will become the major shareholder of OCI Holdings. OCI Holdings will oversee the integration and have Ju-Hyun Im as the representative for the 'Pharmaceutical & Biotech' business sector, while Woo-Hyun Lee, the third-generation leader of OCI Group, will serve as the representative for the 'Advanced Materials & Renewable Energy' business sector.

In the outlined integration structure, KOSPI-listed OCI Holdings will acquire approximately 27.03% (20,651,295 shares) of KOSPI-listed Hanmi Sciences at a value of around $575 million, with the anticipated acquisition date set for June 30th.

Examining the details, Young-Sook Song, current Chairman of Hanmi Pharmaceutical Group, will contribute her ownership of 1,141,495 shares of Hanmi Sciences to OCI Holdings through an in-kind investment. Chairman Song's daughter, President Ju-Hyun Im, will also make an in-kind investment by contributing her ownership of 5,634,810 shares of Hanmi Sciences to OCI Holdings. In summary, Chairman Song and President Im will collectively make an in-kind investment of their total ownership of 6,776,305 shares of Hanmi Sciences into OCI Holdings and receive a total of 2,291,532 new shares of OCI Holdings.

OCI Holdings plans a $188.7 million paid-in capital increase through a third-party allocation of new shares for Chairwoman Song and President Im. This aims to secure OCI Holdings shares in exchange for existing shares held by the Hanmi Pharmaceutical Group's founding family through in-kind contributions.

As of the end of the third quarter in 2023, the largest shareholder of OCI Holdings is Hwa-Young Lee, the second-generation founder of OCI Group and chairman of UNID, with an ownership stake of 7.31%. Through in-kind contributions of Hanmi Sciences shares, Chairwoman Song and President Im reduce OCI Holdings' largest shareholder, Hwa-Young Lee, from 28.7% to 25.7%. President Im becomes the sole first-generation shareholder with 8.6%, and Chairman Hwa-Young Lee's ownership decreases to 6.64%. Looking ahead, OCI Group holds 25.7%, and Hanmi Pharmaceutical Group holds 10.4% in OCI Holdings, subject to future changes.

Chairwoman Song Young-sook and the Ga-Hyun Cultural Foundation transfer 7,446,674 Hanmi Sciences shares to OCI Holdings. The estimated cash from this share sale, including Chairwoman Song, is approximately $207.2 million. The funds will reportedly be used to settle inheritance taxes.

In summary, OCI Holdings, the parent company of OCI Group, acquires a total of 20,651,295 Hanmi Sciences shares (existing + new) through three methods: 1) in-kind contributions (6,776,305 existing shares), 2) share transfer agreement (7,446,674 existing shares), and 3) third-party allocation of new shares (6,433,316 new shares). This results in OCI Holdings having a 27.03% ownership stake in Hanmi Sciences. President Ju-hyun Im's ownership stake in Hanmi Sciences decreases from 10.2% to 2.0%, an 8 percentage point reduction.

Looking at OCI Holdings alone, through the in-kind contribution, President Im holds 8.6%, and Chairwoman Song holds 1.7% in OCI Holdings. The revised ownership structure resulting from the integration of OCI Group and Hanmi Pharmaceutical Group is as follows: Ju-hyun-Im, President + Young-Sook Song, Chairwoman (total ownership stake of 10.4%) + OCI Group founders (ownership stake of 25.7%) → OCI Holdings → Hanmi Sciences.

Chairwoman Young-Sook Song relinquishes her role as the largest shareholder in Hanmi Sciences by transferring most of her shares to OCI Holdings through in-kind contributions and share sales. With the integration of the two groups, President Ju-Hyun Im becomes the sole major shareholder of OCI Holdings, finalizing the leadership succession within Hanmi Pharmaceutical Group. OCI Holdings plans to initiate brand integration efforts, encompassing name and corporate identity, reflecting aspirations for innovation and a new beginning stemming from the group's integration with Hanmi Pharmaceutical.