KT&G's headquarters in Daejeon / Korea Times file

Flashlight Capital Partners (FCP), a Singapore-based activist fund, on Monday offered to acquire the ginseng business unit of KT&G, South Korea's dominant tobacco company, for 1.9 trillion won ($1.4 billion).

Flashlight Capital, a KT&G shareholder, has submitted a letter of intent (LOI) to the tobacco firm's board of directors to acquire a 100 percent stake in Korea Ginseng Corp. (KGC), the fund said in a statement.

KGC is wholly owned by KT&G, whose businesses ranges from traditional cigarette products to next-generation heat-not-burn product lil.

The proposed acquisition price represents a 50 percent premium over the 1.2-1.3 trillion-won valuation mentioned by KT&G Chief Executive Bang Kyung-man during the company's Investor Day 2023, it said.

Citing its "immense potential," FCP Managing Director Lee Sang-hyun said in the statement, "We aim to develop Korea ginseng into a global brand, comparable to Manuka honey or Maotai."

FCP has called on KT&G to spin off its wholly owned ginseng unit since 2022, arguing that the tobacco-ginseng pairing was a "wrong marriage" and that KGC's value is not reflected in KT&G's stock price at all.

But KT&G's board rejected the proposal in 2023.

In response to the acquisition offer, KT&G said in a statement that FCP "unilaterally" sent the LOI to the board Sunday night without any prior discussions with the company.

"The company will take a closer look at the content of the proposal," it said.

In July, FCP, which owns a 0.5 percent stake in KT&G, took issue with the current CEO compensation program, in which they argue the annual salary for the CEO is not connected with the company's stock prices. (Yonhap)