Shares soar amid hopes for governance changeShares of Hanjin Group affiliates soared Monday following the death of Chairman Cho Yang-ho likely due to expectations that the group would reshuffle its governance structure.
Hanjin Kal, the group’s de facto holding company, jumped 20.63 percent to 30,400 won ($26.57). Korean Air surged 1.88 percent to 32,500 won.
Its affiliate Jin Air also advanced 3.40 percent to 24,350 won and the Korean Airport Service gained 4.76 percent to 46,200 won. All affiliates outperformed the broader Kospi’s 0.04 percent gain.
Market watchers point out that the news of Cho’s death seems to have resolved the so-called CEO risk, as controversies surrounding owner family members - Cho, his wife and three children - have damaged the corporate value of Hanjin Group affiliates.
Cho was on trial on charges of embezzlement and breach of trust. He lost control of Korean Air at an annual general meeting held last month.
“Cho’s death raises the possibility of a fight among shareholders over managerial rights, which could increase the magnitude of changes to [affiliates’] shares in the future,” said Song Chi-ho, an analyst at eBest Securities.
“Intensifying competition to purchase affiliate shares could trigger shares to continue increasing.”
Analysts warn that share prices could fluctuate further if the owner family loses the largest shareholder status of Hanjin Kal to state-run institutions after paying inheritance tax.
Cho reportedly owned 345.4 billion won worth of the group’s shares, and the owner family would have to pay 172.7 billion won in inheritance tax if highest rate of 50 percent is applied.
The family could end up owning 20.03 percent of Hanjin Kal, lower than the 20.81 percent owned by Korea Corporate Governance Improvement and National Pension Service combined.
BY KO JUN-TAE [firstname.lastname@example.org]