Bando joins family feud over control of Hanjin

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Bando joins family feud over control of Hanjin

Share prices of Hanjin affiliates rallied Monday as the group expects a fierce proxy battle in coming months.

One of its major shareholders, Bando Engineering & Construction, raised its stake in the holding company Hanjin KAL on Friday and said it wanted to participate in management.

The price of Hanjin KAL closed at 41,900 won ($36) on Monday, 0.48 percent up from the previous trading day. The price peaked at 45,800 won per share during trading. The price of preferred stock closed at 63,900 won per share, which was a 6.32 percent jump from the previous trading day.

The price of Korean Air’s preferred stock jumped 8.7 percent, closing at 20,000 won per share. Shares of Hanjin, a logistics affiliate, also experienced a 5.34 percent jump, closing at 30,600 won per share.

Bando Engineering & Construction, which owned 6.28 percent of Hanjin KAL shares, raised its stake through three of its subsidiaries - Daeho, Hanyeong and Bando Developments - to 8.28 percent, the company said in a regulatory filing on Friday after the market closed.

It also changed its reason for acquiring the shares from a simple investment to wanting to be part of management.

“The company doesn’t have detailed plans [regarding the rights of shareholders] but if there should be issues related to the company’s management, we will consider acting as a shareholder and taking into account the interests of the company, shareholders and other stakeholders,” the company said in a regulatory filing.

It went on to mention that shareholders’ rights include “the right to appoint, fire or suspend the duties of the board members.”

Bando Engineering held less than 5 percent of Hanjin KAL in 2018 but started to raise its stake last October when conflict between the heirs of Hanjin’s late chairman Cho Yang-ho arose. Cho Hyun-ah accused her younger brother Cho Won-tae of running the business his own way and not following their father’s dying command to give her a role.

It bought 40,000 shares in October to surpass 5 percent ownership, followed by another purchase in November of about 722,000 shares to land at 6.28 percent ownership.

After increasing its stake last Friday to 8.28 percent, Bando Engineering & Construction is now the fourth-largest shareholder after the controlling family, activist private equity fund KCGI (which has 17.29 percent) and Delta Air Lines (which has 10 percent). The National Pension Service comes in fifth with 4.1 percent.

Members of the controlling family have a total of 24.8 percent: Cho Won-tae has 6.52 percent; Cho Hyun-ah 6.49; younger sister Cho Hyun-min 6.47; and their mother Lee Myung-hee 5.31 percent.

If the four members stick together, backed by ally Delta Air Lines, the family’s control of Korea’s 13th-biggest conglomerate will be secure. If, however, the conflict between Cho Won-tae and Cho Hyun-ah continues, the Cho family could conceivably be ousted from management.

“If the purpose of share acquisition changes to management participation, by law the buyer has to return the profit that incurs from the new stock for six months back to the company,” said Choi Nam-gon, an analyst at Yuanta Securities. “The fact that Bando is willing to do this means it really is ready to make a strategic move. It seems that KCGI and Bando will play a major role in how the Hanjin’s family feud will end.”

Cho Won-tae’s tenure as chairman expires on March 17. Hanjin’s shareholder meeting is planned to be held in March as well.

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