[Bandogroup's Affair]② Chairman Kwon Hong-sa, Why Did He Get Involved in the Hanjin KAL Dispute?

Hanjin Family Siblings Cast Deciding Votes and Mentioned Roles Like Cho Hyun-ah's Guardianship
Possibility of Pursuing Independent Management Rights

Kwon Hong-sa, Chairman of Bando Construction

[Asia Economy Reporters Lim Jeong-su and Park Hyung-soo] Attention is focused on the intentions of Kwon Hong-sa, chairman of Bando Construction, as Bando Group declared management participation after acquiring additional shares of Hanjin KAL. Depending on whom Bando Group aligns with, the management control structure of Hanjin KAL, including Korean Air, could change. There are speculations about connections with former Vice President Cho Hyun-ah and attempts to secure independent management rights of Hanjin KAL.

◆Sibling Casting Vote Role(?)... Focus on the Link Between Chairman Kwon, Law Firm Won, and Cho Hyun-ah

Bando General Construction suddenly declared management participation on the 10th after acquiring additional shares of Hanjin KAL through its affiliate Daehok Development. As a result, the prevailing view is that Bando Group will have the authority to intervene in the appointment and dismissal of chairmen and executives, amendments to the company’s articles of incorporation, and will be deeply involved in Hanjin KAL’s management.

The business community has put forward various speculations regarding the future structure. Initially, Chairman Kwon stated that he purchased shares of Hanjin KAL due to his friendship with the late Cho Yang-ho, former chairman of Hanjin Group. This was interpreted as a side support to secure stable management rights for the three siblings of the Hanjin family.

However, recently, many view the possibility of an alliance with former Korean Air Vice President Cho Hyun-ah. There have been media reports that Chairman Kwon and former Vice President Cho recently met.

The law firm 'Won' is pointed out as the connecting link between Chairman Kwon and Vice President Cho. Won acted as the representative for former Vice President Cho and put a brake on Chairman Cho’s management rights. This law firm is known to include many lawyers who were active in Minbyun (Lawyers for a Democratic Society), civic groups, and members of the Uri Law Research Association. Last year, it attracted attention by recruiting former Minister of Justice Kang Kum-sil as its representative.

Chairman Kwon is known to have built friendships with government figures such as former President Roh Moo-hyun while working in construction in Busan. During the participatory government era, as a local construction company owner, he was reappointed twice as chairman of the Korea Construction Association, a position that rotated among nationwide construction company owners. At that time, he suffered embarrassment by receiving a fine for providing illegal political funds to Ahn Hee-jung, a close aide of President Roh.

He is also mentioned as a business figure with close ties to Park Yeon-cha, chairman of Taekwang Industrial. A law firm official speculated, "Considering past relationships, there is a possibility of an undisclosed alliance among Chairman Kwon, former Vice President Cho, and Won."

If Chairman Kwon acts as a white knight for former Vice President Cho, it could bring significant changes to the Hanjin Group’s governance structure. If joined by Lee Myung-hee, advisor of Jungseok Enterprise, Cho Hyun-min, executive director of Hanjin KAL, and KCGI, Chairman Cho’s management rights could become precarious.

◆Possibility of Independent Management Rights Acquisition... Sufficient Financial Power

It is also not possible to rule out the possibility that Bando Group will exclude the three Hanjin siblings and independently seek to secure management rights of Hanjin KAL. This is analyzed as a necessity for business diversification through new ventures in the process of succession to Kwon Jae-hyun, executive director of Bando Development and son of Chairman Kwon, amid a bleak outlook for the group’s core construction and development businesses.

There are also speculations that Executive Director Kwon will play a significant role in the process of Bando Group’s management participation in Hanjin KAL. It is analyzed that Chairman Kwon, who was friendly with former Chairman Cho, would find it burdensome to participate in management by attacking the three siblings. An investment banking (IB) industry official said, "From a long-term perspective for Bando Group’s succession, it is necessary to observe Executive Director Kwon’s role in this management rights dispute phase."

The abundant cash mobilization capability is expected to be a major strength in the management rights dispute phase. It is estimated that Bando Group invested about 154 billion KRW in cash to purchase shares of Hanjin KAL. However, it is still evaluated that they have the ability to acquire a significant number of additional shares.

Over the past three years, Bando Holdings’ consolidated average annual EBITDA is around 500 billion KRW, indicating good cash-generating ability. At the end of 2018, out of total assets of 1.7 trillion KRW, more than 1.4 trillion KRW consisted of current assets. A significant portion of current assets are receivables from sales and short-term loans, which can be quickly converted into cash.

The outstanding loan balance is only about 20 billion KRW, so it can be considered virtually debt-free management. There is considerable borrowing capacity, and cash acquisition is also possible by leveraging affiliate shares and other assets.

An IB industry official analyzed, "Bando Group can secure about 1 trillion KRW just through cash on hand and liquidating current assets. Considering that Hanjin KAL’s market capitalization is 2.5 trillion KRW, Bando Group’s ability to purchase additional shares is sufficient."

This content was produced with the assistance of AI translation services.