Daemyung Sono, the Second-Largest Shareholder, Declares Bid for Management Control
Only a 3% Point Gap with the Largest Shareholder
Choice of 40% Minority Shareholders Is Key... Showdown at March General Meeting
The management rights dispute at T'way Air is set to begin in earnest. Daemyung Sono Group, the second-largest shareholder, has demanded additional investments in areas such as maintenance to increase long-haul routes as T'way Air fills the gap left by Asiana Airlines. Meanwhile, the largest shareholder side is hesitant due to financial constraints. Since the difference in shareholding between the two major shareholders is just about 3 percentage points, conflicts over management rights are expected to arise from various aspects.
Daemyung Sono Declares War: "If No Investment, Hand Over Management Rights"
According to industry sources on the 21st, Daemyung Sono Group is expected to request inspection and copying of the shareholder registry and propose shareholder motions for director appointments to T'way Air's management within the day. Following demands for the resignation of the current management, including Na Seong-hoon, CEO of Yerimdang and Vice Chairman of T'way Air, and capital raising through a paid-in capital increase, they have officially entered the management rights dispute.
The key factor is the choice of minority shareholders who hold over 40% of the total shares. As of the 14th of last month, the shares held by the largest shareholders and related parties, including T'way Holdings and Yerimdang, stood at 30.06%. Compared to the 26.77% held by the second-largest shareholder Daemyung Sono Group (Sono International 16.77%, Daemyung Sono Season 10.00%), the gap is only 3.31 percentage points. Excluding the employee stock ownership association's 2.91%, minority shareholders hold more than 40%.
Daemyung Sono Group had previously avoided mentioning the management rights dispute but now appears to be revealing its true intentions. Earlier, Seo Jun-hyuk, Chairman of Sono International, had shown interest in the aviation industry since last year after ending the 2022 management rights dispute. Securing shares in Air Premia along with T'way Air is part of the same strategy.
First Clash Over Director Appointments at March General Meeting... Minority Shareholders Are Key
Daemyung Sono Group is expected to focus on appointing a friendly board of directors by replacing directors at T'way Air's regular general meeting in March. Since the shareholder registry for exercising voting rights at the regular general meeting was finalized as of the end of last year, a public tender offer is unlikely for the time being.
Currently, T'way Air's board consists of seven members: four inside directors?CEO Jung Hong-geun, Vice Chairman Na Seong-hoon, Head of Management Division Kim Hyung, and Deputy Head of Finance Division Jung Chang-hee?and three outside directors?Choi Seung-hwan, former Vice President of Samjong KPMG; lawyer Kim Seong-hoon; and Choi Seong-yong, CEO of The Snowball. Among them, the terms of CEO Jung, Head Kim, lawyer Kim, and CEO Choi expire this March. Considering two vacancies among the total nine board seats, six director appointments will be contested.
T'way Air's articles of incorporation do not allow cumulative voting, which grants voting rights proportional to the number of directors to be appointed per share. Instead, directors are elected by simple voting, with one vote per share, making the choice of minority shareholders an absolute determinant.
Previously, Daemyung Sono Group demanded a paid-in capital increase for maintenance due to the annual surge in malfunctions and breakdowns at T'way Air. Sono plans to participate directly in the shareholder allocation paid-in capital increase without external financing. Recently, Daemyung Sono issued exchangeable bonds (EB) worth approximately 300 billion KRW and plans to raise funds by listing Sono International this year.
On the other hand, T'way's financial situation is tight. As of the third quarter of last year, T'way Holdings' cash equivalents amounted to only 448.08 million KRW. Even when adding all current assets, it totals just 8.1 billion KRW. Yerimdang's cash equivalents during the same period were also recorded at 6.9 billion KRW. With T'way Air's shares rising amid the management rights dispute, securing a stable stake is challenging. On this day, T'way Air's closing price rose 9.62% from the previous day to 3,360 KRW. To secure a majority stake, the largest shareholder side would need about 220 billion KRW based on this price.
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