Dongwha Pharmaceutical has filed a lawsuit against medical device company Hironic, seeking a refund of the 12 billion won ($8.2 million) deposit related to their previously planned acquisition.

In November 2024, Dongwha notified Hironic of its decision to withdraw from the acquisition agreement, citing issues discovered during due diligence. However, Hironic rejected the withdrawal and argued that Dongwha was responsible for failing to fulfill its payment obligations, setting the stage for an intense legal battle.

According to Dongwha, the company filed a lawsuit on the week of Jan. 6 against Hironic's CEO Lee Jin-woo and his affiliated person Lee Eun-sook, demanding the return of the 12 billion won deposit. The lawsuit was filed approximately one and a half months after the acquisition withdrawal notification.

"We submitted the lawsuit to proceed with the deposit refund process. Our position remains unchanged regarding the reasons for the withdrawal based on the due diligence findings,” a Dongwha official told Korea Biomedical Review. “We believe Hironic is clearly responsible for the termination of the contract, which is why we are pursuing legal action to recover the deposit."

Previously, in an effort to acquire Hironic, Dongwha had agreed to purchase shares held by the company's largest shareholder, CEO Lee and his affiliated person Lee Eun-sook, through a third-party allocation paid-in capital increase.

The acquisition involved purchasing all shares at 14,400 won per share, amounting to a total of 120.7 billion won. Additionally, Dongwha planned to participate in a 40 billion won capital increase to secure more shares, bringing the total acquisition scale to 160 billion won.

To facilitate the acquisition, Dongwha signed a stock purchase agreement in September last year and conducted due diligence.

Following the due diligence process, Dongwha found discrepancies in Hironic's compliance with warranties and representations, leading to the decision to terminate the contract. However, the company has not disclosed specific details, citing confidentiality agreements.

A Hironic representative was unavailable to comment on Donghwa’s recent lawsuit filing.

Hironic has been shifting the blame to Dongwha, asserting that the acquisition contract remains valid despite Dongwha's termination notice. Hironic claims that Dongwha's failure to fulfill its obligation to pay the remaining balance by the closing date last month constitutes a breach of contract, which prompted it to finalize the termination.

Hironic also maintains that it has no obligation to return the 12 billion won deposit, as it believes the responsibility for the contract termination lies with Dongwha. The company has also indicated the possibility of pursuing a compensation claim for damages resulting from the termination.