Activist fund declares substantial Hanjin stake

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Activist fund declares substantial Hanjin stake

A local activist fund revealed late Thursday that it is now the second-largest shareholder in the Hanjin Group’s holding company. The fund is expected to engage management and pressure other investors.

Korea Corporate Governance Improvement, or KCGI, a homegrown activist private equity firm, disclosed that its Grace Holdings subsidiary now owns 9 percent of Hanjin Kal. The shareholding is second largest after Chairman Cho Yang-ho’s 17.84 percent stake.

“We don’t have any specific plans yet, but we will consider taking action in line with management objectives when issues concerning the execution of operation arise in the future,” the company said in a public disclosure.

Measures could be taken in relation to the appointment or dismissal of executives, dividend ratios and any change in the articles of incorporation, the fund said.

At the helm of the activist fund is Kang Sung-boo, a former chief executive officer at LK Investment Partners, a Korean asset manager. His career includes time in the research departments of local brokerage companies, such as Shinhan Investment and now-defunct KDB Daewoo Securities. In his previous jobs, Kang made a name for himself by releasing a series of reports on the corporate governance structures of Korea’s major conglomerates.

Analysts believe that the activist fund is targeting the de facto holding unit of Hanjin Group because a number of scandals - including the “nut rage” and “water rage” incidents - and because poor management have led to low valuations for the company.

As the largest shareholder and his family own only 28.95 percent of the stock, Hanjin Kal is an easy target for activist engagement.

“The stock ownership structure of Hanjin Kal makes it vulnerable to an activist fund attack,” said Song Chi-ho, an analyst at eBEST Securities.

He added that 58.38 percent of the company’s shares are held by small retail shareholders, while the National Pension Service is the third largest shareholder, with an 8.35 percent stake.

“The company has also been under pressure to reform following major shareholder scandals,” he added.

Lee Han-joon, an analyst at KTB Investment & Securities, expects that the fund will offer challenges when it comes time to add board members.

“KCGI is expected to take action as early as next year,” Lee said.

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