[THE INVESTOR] Local private equity fund KGCI has become the second-largest shareholder of Hanjin KAL, operator of the country’s largest airline Korean Air, seen as a challenge to the management of the troubled firm.

KGCI announced on Nov. 15 it has acquired 5,322,666 shares or 9 percent stake in Hanjin KAL for 24,557 won (US$21.47) apiece through its subsidiary Grace Holdings. It has become the second-largest stakeholder after Chairman Cho Yang-ho and people close to him who own 28.95 percent stake. 

Hanjin KAL Chairman Cho Yang-ho

Hanjin KAL shares soared as high as 17 percent on Nov. 16 as investors expect the PEF to have a greater say management.

Family-owned Hanjin Group has been embroiled in several scandals recently. Cho Hyun-min, the youngest daughter of the chairman, recently gained notoriety due to her mistreatment of employees, which led to a series of government and prosecutorial probes into the Korean Air Group and its businesses. Her sister Cho Hyun-ah made headlines globally back in 2014 for the so-called ”nut rage” incident.

Hanjin KAL’s largest shareholders are Chairman Cho’s family. He owns 17.84 percent while his uncle and former vice president of the company Cho Joong-gun holds 2.4 percent. The chairman's three offspring hold a total of 6.91 percent.

Market watchers said there is a chance that KCGI could join force with other major shareholders such as Korea’s National Pension Service with an 8.35 percent stake, Credit Suisse with 5.03 percent and Korea Investment Management with 3.81 percent. Together they can form a formidable block representing 26.19 percent stake.
 

KCGI Founder and CEO Kang Sung-bu

KCGI was launched in July by 45-year old Kang Sung-bu who led LK Investment Partners and is known as an activist investor.

In Korea, shareholder activism gained reputation after Elliott Management attempted to block a merger between Samsung C&T and Cheil Industries, two affiliates of Samsung Group. The hedge fund is currently putting pressure on Hyundai Motor Group to boost shareholder returns and speed up restructuring its corporate governance.

Earlier this year, domestic fund management firm Platform Partners demanded Macquarie Korea Infrastructure Fund to replace its fund manager citing reckless management and excessive fees.

“We don’t have any specific plans yet, but if there are any matters related to the execution of the company’s business in the future, we will consider relevant actions in accordance with the scope and methods permitted by the Capital Market and the Financial Investment Business Act,” KCGI said in a public filing.

By Park Ga-young (gypark@heraldcorp.com)