Hanjin KAL proxy fight looms as new investor comes to light

Hanjin KAL, the holding company of South Korea’s No. 1 air carrier Korean Air, is likely to face a proxy fight over its management, after it welcomed affiliates of builder Bando Group as major stakeholders.

Eyes are fixed on whether Bando will act in favor of either of late Hanjin Chairman Cho Yang-ho’s scions in the shareholders meeting in March.

Incumbent Chairman Cho Won-tae’s tenure is set to expire by March 2020. The successor’s reappointment appears to be facing uncertainties, as his conflict with his elder sister Cho Hyun-ah and mother Lee Myung-hee has come into the media spotlight. 

While the new investor Bando has yet to elaborate on its plans for shareholder engagement, its 8.28 percent stake in Hanjin KAL may serve as the casting vote for Won-tae’s fate in the family-owned conglomerate.

On Friday, Bando Group’s subsidiaries, including Daeho Development and Hanyeong Development, announced they had bought a combined 2 percent voting rights in Hanjin KAL for 46.8 billion won ($40.3 million) since December.

Bando Group, known for its flagship apartment franchise Bando U-Bora, is ranked No. 13 in terms of business performance, according to the Land Ministry in 2019. Bando Chairman Kwon Hong-sa is reportedly an acquaintance of late Hanjin Chairman Cho.

Bando became the third-largest shareholder in Hanjin KAL -- a holding company of transportation-to-heavy industry conglomerate Hanjin Group -- after Korean activist private equity firm Korea Corporate Governance Improvement’s 17.29 percent and Atlanta-based Delta Air Lines’ 10 percent.

Some 36,000 shareholders with less than 5 percent ownership hold a combined 45.09 percent stake in Hanjin KAL, listed on the Korea Exchange’s main bourse Kospi, as of end-September. They include the National Pension Service, Korea’s public pension fund that was once the third-largest Hanjin KAL shareholder, whose ownership was reduced to less than 5 percent as of April last year.

The announcement of Bando’s stake purchase also heralded Bando’s intention to engage in Hanjin KAL’s business, contrary to a disclosure a month earlier where it played down the possibility of such activities.

“We will take shareholder actions into account abiding by laws and the needs of the company, considering the profits of the company and stakeholders,” wrote Daeho Development in a regulatory filing Friday, adding its actions include the appointment or dismissal of Hanjin KAL executives.

The Hanjin owner family evenly owns shares outnumbered by the three-largest shareholders. As of Nov. 14, Won-tae, who also heads the group’s crown jewel Korean Air, owns a 6.52 percent stake, while Hyun-ah holds a 6.49 percent stake. Won-tae’s younger sister Cho Hyun-min may exercise 6.47 percent voting rights, while Won-tae’s mother Lee holds 5.31 percent of its common shares.

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