Activist fund invests W100b in LIG Nex1 in ESG push

South Korean activist fund Korea Corporate Governance Improvement has bought 100 billion won ($84 million) in exchangeable bonds issued by weapon system developer LIG Nex1, a filing showed Wednesday.

The investment is aimed at improving LIG Nex1’s performance under the criteria of environmental, social and governance responsibility and giving birth to LIG Nex1’s new line of business, according to KCGI. The investment manager did not elaborate on its future ESG strategy for the defense company based in Yongin, Gyeonggi Province.

The hybrid securities, which KCGI purchased in late September, are exchangeable with 1.9 million shares of LIG Nex1, currently owned by the firm‘s parent LIG Group, according to the filing submitted to the Financial Supervisory Service. These shares amount to 8.6 percent voting rights in LIG Nex1.

The bonds comprise those with one-year maturity that are exchangeable with shares priced at 50,815 won apiece, and those that have a four-year life, exchangeable with shares for 53,335 won each. KCGI is given the option to exchange the bonds with ordinary shares.

LIG Nex1, trading on the Korea Exchange, slid 7.4 percent Wednesday to close at 46,600 won.

KCGI said the investment is in line with its partnership with LIG Nex1, which started with their joint effort to buy a stake in telecommunications equipment firm Inno Wireless.

KCGI, previously the largest shareholder of Inno Wireless through a co-investment with LIG Nex1 in 2018, handed over its rights to control of the company to LIG Nex1 in November 2020.

KCGI, led by former stock analyst Kang Sung-boo, is a high-profile activist fund that attempted a hostile takeover of Hanjin KAL, the top-tier holding company that owns flag carrier Korean Air, in the late 2010s. The fund has also openly joined a bid to acquire Indian carmaker Mahindra & Mahindra’s Korean sport utility vehicle arm SsangYong Motor, partnering with electric bus maker Edison Motors.

By Son Ji-hyoung (consnow@heraldcorp.com)