Joo Hyun-ah, KCGI, and Bando Form Tripartite Alliance... "Introduction of Professional Management System" (Comprehensive)

"Will Not Step into Frontline Management"... Goal to End Cho Won-tae Regime
Urgent Crisis for Cho Won-tae... Management Rights Likely to Fluctuate Depending on Lee Myung-hee and Cho Hyun-min's Decisions

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] Former Korean Air Vice President Cho Hyun-ah, private equity fund (PEF) KCGI, and Bando Construction have formed a three-party alliance ahead of the March Hanjin KAL shareholders' meeting, which will decide the management rights of the Hanjin Group. This has intensified the management rights dispute within the Hanjin Group, entering what can be seen as the second round.

Hanjin KAL announced on the 31st that the shareholding ratio of the limited company Grace Holdings (KCGI) and its special affiliates changed from the previous 17.29% to 32.06%. This is due to the joint holding agreement signed by former Vice President Cho (6.49%), KCGI (17.29%), and Bando Construction (8.28%).

◆ 'KCGI and Special Affiliates' Become Largest Shareholder... Turbulent Times for Hanjin = The previous largest shareholders of Hanjin KAL were Chairman Cho Won-tae (6.52%), former Vice President Cho (6.49%), Executive Director Cho Hyun-min (6.47%), and Advisor Lee Myung-hee of Jungseok Enterprise (5.31%), including the largest shareholders and special affiliates (28.93%).

However, with this joint holding agreement, former Vice President Cho's shareholding has moved away from the previous largest shareholders and special affiliates group to become part of the limited company Grace Holdings and special affiliates (32.06%). Thus, the largest shareholder of Hanjin KAL has changed to the three-party alliance centered around KCGI.

Initially, in the business community, there were many views that although former Vice President Cho aimed for group management rights and KCGI aimed for corporate culture and governance improvement?aligning their primary interests (leadership change)?a practical alliance would be difficult. However, since this month, the three parties have met and explored the possibility of an alliance, and recently the possibility of building a joint front has rapidly emerged.

◆ Alliance Declares "Introduction of Professional Management System"... Aiming to End Cho Won-tae's Regime = Immediately after the disclosure, the alliance issued a statement declaring the introduction of a "professional management system" and announced their plan to unite at the upcoming March Hanjin KAL shareholders' meeting. At the March shareholders' meeting, the reappointment of Chairman Cho as an inside director is expected to be proposed. This directly targets the 'Cho Won-tae chairman regime' of the Hanjin Group.

Law firm Taepyungyang, on behalf of former Vice President Cho, KCGI, and Bando Construction, stated in a joint statement on the afternoon of the same day, "We agreed that the current management situation of Hanjin Group, including Korean Air, is in a serious crisis and that it cannot be improved under the current management." They added, "It is necessary to enhance shareholder value through innovation of existing management methods, including the introduction of a professional management system and management efficiency."

They also explained, "To this end, we have agreed to actively cooperate in activities for the growth and development of the Hanjin Group, such as exercising voting rights and shareholder proposals at the upcoming Hanjin KAL shareholders' meeting." They added, "This was achieved suddenly because former Vice President Cho, a member of the existing major shareholder family, fully agreed after much consideration with the improvement direction consistently raised by KCGI, and Bando Construction also actively agreed."

Furthermore, they stated, "We will strengthen the professional management system and board-centered management, establish exemplary governance that is not influenced by the interests of specific individual shareholders, and promote the interests of neglected general shareholders." They concluded, "To this end, the three of us will not take the lead in management but will do our best to ensure innovative management by professional managers."

◆ Urgent Situation for Cho Won-tae... What About Lee Myung-hee and Cho Hyun-min? = The urgent situation falls on Chairman Cho's side. With former Vice President Cho's departure, it is uncertain whether he can secure an advantage in the 'vote battle' at the shareholders' meeting scheduled for March this year.

Currently, there are not many shares that can be classified as Chairman Cho's "certain allies." These include Chairman Cho (6.52%) and a group-related foundation where he serves as a director (4.15%). Delta Air Lines (10%) and Kakao (1%) are also considered potential allies. The situation of other family members is not easy either. Younger brother Executive Director Cho (6.47%) has not expressed a position, and mother Advisor Lee (5.31%) caused a commotion with Chairman Cho over management rights last Christmas.

Within and outside the business community, it is believed that the direction of the management rights dispute will depend on the decisions of Advisor Lee and Executive Director Cho, who have not yet expressed any position. If both side with former Vice President Cho, Chairman Cho could be cornered. Conversely, if both side with Chairman Cho, the shareholding ratios of the family and the three-party alliance will be similar.

Former Vice President Cho's side is currently distancing itself from Advisor Lee and Executive Director Cho regarding this joint holding agreement. A representative of law firm One, the legal representative of former Vice President Cho, said, "As far as we know, there has been no exchange of opinions with Advisor Lee or Executive Director Cho regarding this joint statement."

A business community official said, "Chairman Cho recently boarded a chartered flight to Wuhan, China, attempting internal and external public opinion battles, leading to interpretations that he might be cornered." He added, "Ultimately, whether Advisor Lee and Executive Director Cho side with either party will determine the direction of the management rights."

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