Control of Hanjin Group at Stake
Hanjin KAL, the holding company of Hanjin Group, is going to handle the issue of reappointment of Hanjin Group chairman Cho Won-tae at its shareholder meeting scheduled for late March. At present, he is the only Hanjin Group owner family member that is a Hanjin KAL inside director. The family may lose its control over the group if he fails to be reappointed.
In the meantime, Bando Engineering & Construction recently declared that it would take part in the management of Hanjin KAL. The construction company is likely to exercise a casting vote at the shareholder meeting. In Hanjin KAL, director appointment or dismissal requires the consent of more than 50 percent of shareholders present. Last year, 77.18 percent of shareholders attended the meeting, which means a shareholding of at least 39 percent or so is likely to be required for the family to maintain its control this year.
The best scenario for the chairman is to join forces with the other family members by mending fences with former Korean Air vice president Cho Hyun-ah. In this case, the shareholding of the family and affiliate persons reaches 28.84 percent. Delta Air Lines, which is in business partnership with Korean Air, will increase it to 38.84 percent, and then the family can stably control the group.
The former Korean Air vice president’s current shareholding in Hanjin KAL is 6.49 percent. If she refuses to work with the chairman, the shareholding of the chairman and affiliate persons will stand at 22.45 percent. Then, even with Delta Air Lines siding with him, the chairman will have a hard time meeting the target without the aid of foreign and minority shareholders. Bando Engineering & Construction can play a crucial role in this case.
Last year, the National Pension Service, which was the third-largest shareholder with a shareholding of 7.34 percent, voted for the appointment of Hanjin KAL CEO Seok Tae-soo, a close aide to the chairman, as an inside director. However, it remains to be seen which side it will take this year. Its current shareholding in the company is 4.11 percent.
Local private equity fund Korea Corporate Governance Improvement (KCGI), in the meantime, is threatening the family’s control with its 17.29 percent shareholding. The activist fund has urged the company to shut down its hotel business and, as such, is unlikely to hold hands with the former Korean Air vice president. If KCGI and Bando choose to side with her, however, their shareholding can reach 31.98 percent and the race will be neck and neck with the National Pension Service and foreign shareholders present.