Equity Competition Unrelated to Voting Rights... Considering a Long-Term Battle
KCGI Responds to Delta Air Lines' Entry: "If JV Profit Sharing Suffers to Protect a Single Major Shareholder, Existing Management Commits Breach of Fiduciary Duty"
[Asia Economy Reporter Yoo Je-hoon] The management rights dispute within Hanjin Group is escalating into a "war of money." Chairman Cho Won-tae and former Korean Air Vice President Cho Hyun-ah have been taking turns purchasing additional shares of Hanjin KAL. In the business community, this share acquisition battle, unrelated to voting rights, is seen as preparation for a prolonged conflict expected to unfold after next month's shareholders' meeting. As the share acquisition battle intensifies, the mutual tensions between both sides are also deepening.
According to the Financial Supervisory Service's electronic disclosure system on the 25th, U.S.-based Delta Air Lines purchased 1% (approximately 590,000 shares) of Hanjin KAL last week, increasing its stake from 10.00% to 11.00%. Considering recent stock prices, the amount Delta Air Lines invested in securing additional shares is estimated to be around 29 billion KRW.
Delta Air Lines' stake expansion, classified as an ally of Chairman Cho, is interpreted as a countermeasure following Bando Construction, a member of the shareholder coalition for Hanjin Group's normalization, purchasing an additional 5.02% stake in Hanjin KAL last week. Bando Construction is also estimated to have invested about 130 billion KRW in expanding its shares.
Amid the exchange of countermeasures between both sides, "other financial institutions" purchased 322,000 shares, equivalent to a 0.54% stake, the day before. Based on the previous day's closing price (51,300 KRW), this amounts to approximately 16.5 billion KRW. Industry insiders speculate that this volume was purchased by the private equity fund KCGI. This represents a "counterattack" by the shareholder coalition in response to Chairman Cho's side's "counterstrike."
Within Hanjin Group, some executives and employees have launched a "Buy 10 Shares of Hanjin KAL" campaign to prevent the shareholder coalition from seizing management rights. While it is difficult to influence the overall situation, it is evaluated that this effort can bolster Chairman Cho's side.
As a result, both sides have increased their stakes in Hanjin KAL. Chairman Cho's side, including his family (18.30%), foundations and special relations (4.15%), Delta Air Lines (11.00%), Kakao (2.00%), and Korean Air's employee association (3.80%), has risen to about 39.25%. Former Vice President Cho's side, including herself (6.49%), KCGI (17.83%), and Bando Construction (13.30%), has secured 37.62%.
However, since the shares purchased by each party after December 26 last year (the record date for shareholders) do not carry voting rights, there is analysis that both sides are preparing for a long-term battle. Regardless of who wins at the March shareholders' meeting, the contest could be renewed through an extraordinary shareholders' meeting.
Accordingly, the competition for share acquisition between both sides is expected to become fiercer. KCGI recently launched a fund aiming for 100 billion KRW, and Bando Construction also holds substantial reserves.
An industry insider said, "Kang Sung-bu, CEO of KCGI, expressed confidence by saying 'there will be no extraordinary shareholders' meeting,' but their influence is still insufficient to achieve a complete victory at the March shareholders' meeting," adding, "They are continuing the share competition with a long-term view, including the extraordinary shareholders' meeting and next year's Korean Air shareholders' meeting when Chairman Cho's CEO term expires."
Meanwhile, as the gap in shareholding between both sides remains within 1-2%, mutual checks and balances are intensifying. KCGI released a statement today criticizing Delta Air Lines' additional share purchase, saying, "If Delta Air Lines' investment was to enhance synergy with JV, it should have been made against Korean Air, which urgently needs financial restructuring," and added, "Therefore, the market's suspicion about the true intention behind this share acquisition has not been resolved."
They further stated, "If Korean Air is placed at a disadvantage during JV profit negotiations to secure the reappointment of the single major shareholder (Chairman Cho) as a director, this could constitute a serious breach of fiduciary duty by the existing management," emphasizing, "Hanjin Group's management and Delta Air Lines must strictly comply with laws and regulations regarding the acquisition of Hanjin KAL shares to avoid any illegalities."
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