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| Hanjin Transportation Chief Marketing Officer Emily Lee Cho, left, poses with company officials at the logistics firm's Jeju branch, Thursday, to celebrate the test operation of hybrid electric parcel delivery vehicles. / Courtesy of Hanjin Transportation |
Activist fund urges owners to stay out of Hanjin Transportation
By Park Jae-hyuk
Emily Lee Cho, also known as Cho Hyun-min and the younger sister of Korean Air owner Hanjin Group Chairman Cho Won-tae, is apparently facing a bumpy road in tightening her control over Hanjin Transportation, the group's logistics arm where she works as chief marketing officer (CMO).
The major obstacle to her plan at this moment is HYK Partners, a newly established domestic private equity firm (PEF) which is the second-largest shareholder of Hanjin Transportation with a 9.79 percent stake, following the group's holding company Hanjin KAL's 27.69 percent.
According to Hanjin Transportation, HYK sent the company a proposal last week calling for the reform of its governance structure and an increase in shareholder value. Both the logistics firm and the PEF declined to disclose the specifics, but the latter reportedly demanded a board seat and the separation of ownership and management. Hanjin Transportation said it was reviewing the proposal.
Some market insiders consider the proposal was intended to prevent the Hanjin Group heiress from taking control over the logistics subsidiary.
She has been repeatedly mentioned as the next Hanjin Transportation CEO; and such an outlook came after the Korea Development Bank (KDB) forced her to stay out of the group's aviation business last month, when the state-run lender was announcing its plan to help Korean Air take over Asiana Airlines.
KDB Vice President Choi Dae-hyun said the Hanjin Group chairman's younger sister and mother would not be involved in the aviation affiliates in response to questions about ethical management.
The heiress has faced severe criticism, since she was accused of throwing water in the face of the manager of Korean Air's advertising agency, HS AD, during a meeting in her Seoul office in 2018. After the incident, she temporarily left the company but returned in June last year as the Hanjin KAL CMO.
According to industry sources, she will resign as an executive of Hanjin KAL and Topas, the group's travel information provider, by the end of this month. Instead, she will focus more on her role as the CMO of Hanjin Transportation, making efforts to discover new growth engines.
New Commercial Law
The revised Commercial Law, which was passed at the National Assembly last week, however, is obviously considered unfavorable to her, according to industry officials.
The revision allows shareholders to put forward proposals without having to have owned the shares for more than six months. In addition, the voting right of each major shareholder will be limited to 3 percent in the election of an auditor who also serves as a board member.
If HYK boosts its stake by creating additional funds and wins supports from other shareholders, such as the National Pension Service, GS Home Shopping and minority shareholders, the Hanjin Group owner family will be forced to give a board seat to the PEF.
This means a larger influence for textile company Kyungbang, which is the virtual owner of HYK after investing 70 billion won ($64 million) in the PEF when it was established earlier this year, over Hanjin Transportation. Kyungbang has therefore practically been the second-largest shareholder of Hanjin Transportation, although it sold its entire stake in the logistics firm to HYK in October.
"It is not often that a Korean company goes activist on another publicly listed company so this new development is drawing attention as HYK ― with major investment backing from Kyungbang ― has publicly declared that it is going activist on Hanjin Transportation," Douglas Kim, an analyst at an independent investment research provider Smartkarma, said in a report.
"There may be an increasing possibility that HYK could partner with Korea Corporate Governance Improvement (KCGI) in trying to improve corporate governance at Hanjin Transportation."
The KCGI is a separate PEF which is in conflict with the Hanjin Group chairman over his control of the group. HYK has denied rumors it may join hands with KCGI.
