Battle of three brothers rattles Hyosung Group

Cho Hyun-moon, the 46-year-old former heir apparent of Hyosung Group, recently expressed his distress over the succession struggle within his family, despite the the fact that he packed up and left a year ago.

In a recent email Cho sent to the Economist, a business weekly magazine and affiliated publication of JoongAng Ilbo, he indicated that he wished to capture the “criminals” spreading infamous rumors about him.

In the midst of Hyosung Chairman Cho Suk-rai’s government tax probe and deteriorating health, speculation is growing that the competition between siblings to take management control is getting fierce to the point where even the long-gone brother will be dragged into the fray.

Such speculation has grown as the oldest and youngest brothers - Cho Hyun-joon and Cho Hyun-sang have been increasing their stakes in the conglomerate since their brother’s departure.

Hyun-joon, Hyosung Group president and eldest of the three, has increased his stake from 7.26 percent in March 2013 to 8.38 percent in June and to 9.85 percent at the end of last year.

His younger sibling, Hyun-sang, who is the vice president of Hyosung, increased his stakes from 7.9 percent a year ago to 9.18 percent today.

“There is an extremely intense competition going on under the surface over who’s going to take control,” said a former official at Hyosung Group, who requested annoymity due to the sensitivity of the issue.

Hyosung Group officially said the increasd holdings of the brothers have nothing to do with succession. They said the brothers were increasing their stakes as a defense against the possibility of a management crisis, including hostile attacks.

Even at the rumors of the possiblity of succession fight between the two brothers, stock values of Hyosung continued to grow, largely as a result of the two brothers continued to increase their stakes despite the rising prices.

The stock value of Hyosung, which was in the 48,000 won range in April, has surged to be traded in the 75,000 won range.

It is reported that the two brothers even took out loans to increase their stakes.

But the race isn’t just limited to the two brothers. Middle son Hyun-moon still suffers from rumors that he left the group because he was elbowed out by his brothers.

The unexpected resignation of Hyun-moon came as a shock not only to people within the conglomerate, but also to the overall business community as he was considered to be the

most promising and likely successor to his father.

In business, Hyun-moon was an outstanding performer. In 2007, when he was promoted to vice president of Hyosung Power & Industrial System Performance Group, the revenue of the heavy industry business was 998 billion won. In 2010, it grew to 2.1 trillion won and then further expanded to 2.6 trillion won in 2012.

Even with his success, Hyun-moon turned in his resignation, saying at the time that he wanted to try his luck in law.

“The fact that he has sold off all his stake in the company indicates that he has no plan to come back [to Hyosung],” said an industry source who requested annoymity due to the sensitivity of the issue.

Yet Hyun-moon continues to be dragged into the situation by rumors the brothers are in conflict over how to manage the conglomerate while others said they pushed him out of the race.

“There were people who were close to the chairman that isolated Hyun-moon,” said a former Hyosung Group official. “There were some conflicts with several officials in the course of a corporate restructuring.”

Industry observer say that the succession to the current chairman could come not long from now especially as the chairman’s health has been deteriorating lately.

The Chairman Suk-rai in 2010 underwent a tumor removable operation on his gall bladder. And recently it is rumored that he was diagnosed with postrate cancer.

Especially with the investgiation by the prosecution on tax evasion and book cooking, his health is rumored to have gotten worse.

But one thing that many agree on is that the final decision will come from the chairman himself who holds 10.32 percent stake in the conglomerate.

It is most likely that his sucession will come from shifting all of his stakes to one of the sons. The speculations in the market is the most likest person among the three to succeed their father at the moment is the eldst Hyun-joon.

Even Hyun-joon’s two daughters owns 0.3 percent stakes each in the conglomerate. Additionally out of the 40 affiliates under Hyosung, Hyun-joon is a registered executive at 10.

BY PARK MI-SO, KIM HAE-YOON [ebusiness@joongang.co.kr]