[Column] Is the Shareholder Proposal by Cha Partners Unrelated to Kumho Management Dispute?

The activist fund management company Cha Partners held a press briefing on the 4th that attracted considerable attention. Given its connection to the management dispute at Kumho Petrochemical, known as the ‘Nephew’s Rebellion,’ the content of the announcement was closely watched. Cha Partners is the entity allied with Park Cheol-wan, the nephew who has clashed with Kumho Petrochemical Chairman Park Chan-gu, and a former executive director at Kumho Petrochemical. Park Cheol-wan is also the largest individual shareholder, holding 9.1% of Kumho Petrochemical’s shares. Due to Cha Partners’ shareholder proposals, the management dispute was expected to experience significant upheaval.

The outcome, however, was quite different from market expectations(?). At the briefing, Cha Partners demanded the appointment of outside directors (audit committee members) and the cancellation of treasury shares, claiming that they were "engaging in shareholder activities to enhance the rights of general shareholders who hold 80% of the total shares," while emphasizing that this was "unrelated to the management dispute."

The claim of being unrelated to the management dispute is something an activist fund can make. Cha Partners holds 200 voting shares of Kumho Petrochemical, which is an extremely small portion of the total shares. Although it purchased 7,179 shares (0.03%) this year for 1 billion KRW, these transactions occurred after the shareholder registry closure date (end of last year), so it has no voting rights at this month’s general meeting.

However, since Cha Partners was delegated shareholder proposal rights by former executive director Park last month, it is difficult to take the claim of being "unrelated to the management dispute" at face value. Especially when looking at the shareholdings of Park and Chairman Park, Cha Partners’ movements are far from ordinary. Park Cheol-wan has been attempting to secure management control by presenting shareholder proposals aimed at winning the votes of general shareholders. The shareholding gap between Park’s side (10.88%) and Chairman Park’s side (15.83%) is less than 5 percentage points. The votes of general shareholders, including the National Pension Service (9.2%), foreign investors, and small shareholders, will determine the outcome of the management control. Following the press briefing, Kumho Petrochemical’s stock price closed at 151,500 KRW, up 2.4% (3,600 KRW) from the previous day.

Since the year before last, Cha Partners has actively demanded shareholder return measures from companies and has achieved meaningful results. However, this briefing only fueled misunderstandings by insisting it was "unrelated to the management dispute." Some in the market speculate that the move was to boost Kumho Petrochemical’s stock price and support Park Cheol-wan’s share sale. It leaves an impression that the dispute was only exacerbated.