 |
|
Hanjin Group Chairman Cho Yang-ho, who is currently under investigation for embezzlement, professional misconduct and fraud, heads to the Seoul Southern District Court for questioning on July 5. (Kim Seong-gwang, staff photographer)
|
Activist fund addresses “misunderstanding” after acquiring 9% of Hanjin KAL shares
The domestic activist fund KCGI said it does not plan to seize management powers in the Hanjin Group after acquiring a 9% stake from the group’s holding company Hanjin KAL. “As much misunderstanding and speculation has raged in connection with our reasons for investing and future plans following the announcement on Nov. 15 that we acquired Hanjin KAL’s 9% share through the special purpose company Grace Holdings, we wish to explain our position,” KCGI said in a position statement on Nov. 19. “Some are interpreting the KCGI #1 fund’s acquisition of a 9% stake as indicating an attempt to seize management powers, but this is contrary to the facts,” it continued. A domestic private equity fund established by former LK Partners CEO and corporate governance structure expert Kang Sung-bu, KCGI has attracted notice as the first domestic activist fund to challenge a chaebol. As the holding company for the Hanjin Group, Hanjin KAL controls major affiliates including Korean Air, Jin Air, and Hanjin. Special relations of the ruling Cho family, including Hanjin Group chairman Cho Yang-ho, account for a combined stake of 28.95%. Regarding the reasons behind its acquisition of the shares, KCGI explained, “The affiliates are severely undervalued due to their possession of idle assets and deferred investment, and with great opportunities to increase company value through improvements to the corporate governance structure, the fund determined that the corporate value of Hanjin KAL can be improved if the fund plays an active role in oversight and controls as a major shareholder.” Observers in the securities community saw the activist fund as having picked a good time to begin its activities, as high-profile incidents of bad behavior by members of Cho’s family have led to a campaign for the family to bow out of management. While KCGI said it has no plans to compete for management powers, its position could be a strategic move. In explaining its own investment strategy, KCGI has said it would “learn a lesson from the failures of Elliott and other overseas funds by taking Korean institutions and sentiments into account when communicating with the market, while refraining from indiscriminate denunciation of managers and the resulting damage to corporate image.” In terms of strategy, its aim appears to be to avoid any head-on collisions for now. “In terms of our future plan of action, there will be an opportunity in the near future to state things in more concrete terms,” the fund added. By Lee Wan, staff reporter Please direct comments or questions to [english@hani.co.kr]
