In the market on Dec. 6, there is a stark difference in perspectives regarding the public acquisition of Hankook & Company by MBK Partners, the largest private equity fund in South Korea. Some view it as “an intervention for the normalization of corporate value,” while others perceive it as “a hostile takeover or merger and acquisition (M&A).”
There is a rationale for normalizing corporate governance due to companies facing “owner risk.” However, there is also a notable concern about the rise of “activist funds.” In fact, instances of activist funds intervening in management disputes, as seen in cases like Hanjin KAL, SK, and SM Entertainment, are on the rise. This year, the number of public stock acquisitions has also surged to 18 cases, marking a 2.6-fold increase compared to the previous year.
MBK, the driving force behind the recent public acquisition, and Cho Hyun-sik, the advisor to Hankook & Company, emphasize the need for a restructuring of the governance. They argue that the repeated legal risks involving Chairman Cho Hyun-bum have created a management vacuum, making stable operations difficult. Chairman Cho was arrested in March on charges of embezzlement totaling 20 billion won (US$15.21 million), breach of trust, and unfair support between affiliates. However, he was recently released on bail. Advisor Cho stated to the media on this day, “Even if the public acquisition succeeds, I will not involve myself in management.”
However, there are significant concerns that the public acquisition could escalate management disputes, plunging the company into confusion. The number of management disputes aimed at M&A purposes is also on the rise. According to the Financial Supervisory Service, the number of stock acquisition reports submitted by listed companies is 17 this year, marking a 2.6-fold increase compared to the 7 cases reported last year. Among the 18 public acquisitions, with Hankook & Company being the ongoing one, seven are primarily for M&A purposes, representing the highest number.
Furthermore, the continued growth of Hankook Tire, despite legal risks associated with the controlling shareholder, strengthens the argument that MBK Partners’ involvement leans towards hostile M&A. In the third quarter of this year, the consolidated sales reached 2.34 trillion won, with an operating profit of 396.4 billion won, representing a 2 percent and 106 percent increase, respectively, compared to the same period last year.