The 'Legitimacy Competition' of Spear and Shield... Hanjin Family's Management Rights Hinge on Securing the Majority Position

'Wuhan-bound Charter Flight' Co-passenger Cho Won-tae... Cho Hyun-ah Agrees to 'Professional Manager Introduction'
Neither Cho Won-tae nor Anti-Cho Won-tae Side Overwhelms... Will Targeting Institutions and Minority Shareholders Accelerate?

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] As former Korean Air Vice President Cho Hyun-ah forms an alliance with private equity fund KCGI and Bando Construction, the management rights dispute is becoming clearly defined as the 'anti-Jo Won-tae coalition versus Jo Won-tae.' Neither of the two major factions has established a solid advantage in the shareholding structure, and it is expected that they will focus all efforts on persuading the remaining family members, institutions, and small investors to secure the 50% threshold. The business community is concerned that the dispute between the Hanjin family siblings could potentially lead to the loss of management rights by the head of the family.

According to the industry on the 3rd, KCGI (17.29%), Bando Construction (8.28%), and former Vice President Cho (6.49%) signed a joint shareholding agreement for Hanjin KAL shares on the 31st of last month, forming a three-party coalition against Jo Won-tae. As a result, the shareholding ratio of KCGI and its special affiliates expanded to 32.06%. This makes the anti-Jo Won-tae three-party coalition the largest shareholder of the Hanjin Group.

On the other hand, Chairman Jo's secured shareholding ratio is around 20%. This assumes the sum of his own shares (6.52%), the group-related foundation (4.15%), and business partners classified as allies, Delta Air Lines (10.00%) and Kakao (1.00%).

Even if his mother, Lee Myung-hee, an advisor at Jungseok Enterprise (5.31%), and his younger sister, Cho Hyun-min, Executive Director of Hanjin KAL (6.47%), who have not yet publicly expressed their positions, join in, Chairman Jo's shareholding ratio would be 33.47%, roughly similar to that of the coalition.

◆Who Will Secure the Majority First = Although the structure is clear, the outcome of the management rights remains uncertain. Neither side has established a definite advantage. To approve or reject Chairman Jo's reappointment proposal, which is the biggest issue at the upcoming March Hanjin KAL shareholders' meeting, both sides need to secure a majority of voting rights.

What draws attention is the movement of Advisor Lee and Executive Director Cho, who have not publicly stated their positions. Considering the 'Christmas incident' at the end of last year when Chairman Jo and Advisor Lee clashed, there is analysis that they might side with former Vice President Cho. However, since the formation of the coalition poses a risk of the group's management rights passing to a third party, many expect them to side with Chairman Jo. Notably, Executive Director Cho returned to Hanjin KAL in June last year, unlike former Vice President Cho.

However, even if Advisor Lee and Executive Director Cho vote in favor of Chairman Jo's reappointment, their combined shareholding remains around 33%, so the key factor is the direction of institutional and small investors holding less than 5%, estimated at 34%. This is the dominant analysis. This year, the attendance rate at the Hanjin KAL shareholders' meeting could be higher than last year's 77.18% due to the management rights dispute, so both sides need to secure an additional 10% or so of shares through institutions and small investors to win, according to industry evaluations.

Lee Sang-heon, a researcher at Hi Investment & Securities, explained, "It is unlikely that the family will easily support the external force KCGI," adding, "Since the shareholding gap between the two sides is not large, the March shareholders' meeting will depend on which side can more effectively present justification to shareholders."

◆Intensifying Battle of Justifications...No Clear Winner Expected = The battle of justifications has already begun in earnest. On the 30th of last month, Chairman Jo personally boarded a chartered flight dispatched for Korean nationals amid the novel coronavirus (Wuhan pneumonia) outbreak, entering the public opinion formation battle. Chairman Jo told reporters at the time, "I heard that the flight attendants volunteered, so I could not stay still," emphasizing, "If it is something I can do at the country's call, I will do anything." This is interpreted as targeting Hanjin Group employees and the public opinion simultaneously.

The KCGI coalition also announced that they will not directly engage in management and proposed the introduction of a 'professional management system.' This aims to improve corporate governance and culture, considering that they have allied with the main figure behind the 'nut rage' incident that plunged the Hanjin Group into crisis.

An industry official said, "For example, the National Pension Service may support the coalition from the perspective of improving corporate governance, but since former Vice President Cho triggered this, they may choose the opposite," adding, "Both sides are expected to fiercely compete in justifications during the proxy battle."

However, the business community also predicts that even if one side wins the March shareholders' meeting, it will be difficult to be regarded as a 'complete victory.' Since neither side has independently established a firm advantage, conflicts could recur at any time.

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