[THE INVESTOR] Korea Corporate Governance Improvement, a local private equity firm, has unveiled plans to more actively participate in the management of Hanjin Group.

The activist fund, led by former LK Investment Partners head Kang Sung-bu, claimed that the family-owned conglomerate has a weak governance structure, high financial leverage, as well as inertia in risk management and response to market conditions. 

Hanjin headquarters building in Seoul.

To fight this, KCGI suggested forming separate committees for Hanjin’s decision-making and executive evaluation. It also urged the company to implement plans to increase its credit rating and lower the reliance on debt. Moreover, it also sought a decrease in investments in leisure facilities and air carrier business.

KCGI added it had urged Hanjin representatives to implement its proposals to regain public trust and boost corporate value, only to fail to reach an agreement.

“We have constantly increased our investments in Hanjin Group based on our determination that we can ensure checks and balances as a major shareholder, which will contribute to improving its corporate value,” KCGI said in a statement.

“The group has the potential to spearhead the transportation and logistics business globally, but the publicly-traded Hanjin units’ stock price has been undervalued because of inferior corporate governance due to misdeeds by the owner family, as also high debt caused by the excessive unused property.”

This is part of a five-year blueprint on improving the governance structure of Hanjin whose leadership last year was embroiled in various allegations such as embezzlement, tax evasion, smuggling, assaults and illegal hiring.

Founded in 2018, the fund seeks to exert influence on Hanjin units through stock acquisitions. KCGI’s SPCs own 10.81 percent of the holding firm Hanjin KAL and an 8.03 percent stake in Hanjin Transportation.

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