Hanjin Kal Corp., the holding company of Hanjin Group, has become a target of a hostile takeover bid.
Grace Holdings announced on Nov. 15 that it holds a 9 percent stake in the company. Grace Holdings is an investment purpose company whose largest shareholder is KCGI 1 Private Equity Investment Joint Venture, which was founded by private equity fund management firm KCGI.
KCGI was established by Kang Sung-boo, who is known as one of Korea's first-generation activist fund operators. KCGI acquired a stake in Hanjin Kal for the purpose of participating in its management.
Hanjin Kal holds 22.19 percent of Hanjin Corp., 100 percent of KAL Hotel Network Co. and 60 percent of Jin Air Co. as well as 29.96 percent of the group’s key affiliate, Korean Air Lines Co.
Market watchers expect the activist fund to make a strong move to improve Hanjin Group's corporate governance as it has pledged to engage in the holding company’s management. KCGI, which is an abbreviation of Korea Corporate Governance Improvement, invests in small and mid-sized companies that need to improve corporate governance or have difficulty in succession.
Hanjin Group chairman Cho Yang-ho and special related parties have a 28.95 percent stake in Hanjin Kal. So, KCGI, which holds a 9 percent stake, has enough power to compete for votes with the owner family.
In addition, 13.24 percent of the stake owned by the family of chairman Cho lie in pledge by the National Tax Service and banks. In September, Credit Suisse Group also secured a 5.03 percent stake in Hanjin Kal.
An official from the industry said, “There is a possibility that Kang will join hands with foreign investors, including Credit Suisse, to take over control of Hanjin Kal. All eyes are on whether activist funds continue to target companies that have striking owner risks in South Korea as well.”
Hanjin Group chairman Cho faces trial later this month on charges of embezzlement and breach of duty. The activist fund's move against Hanjin Kal further undermine's his control of the group.