Hanjin Group's 'Day of Decision' D-4... Focus on National Pension Service and Lawsuit Outcomes

Entering a 'Long-Term Battle' Regardless of Win or Loss
Business Community: "Aviation Industry on the Brink... Situation Must Be Resolved Quickly"

[Image source=Yonhap News]

The regular shareholders' meeting of Hanjin KAL, which will decide the direction of management rights of the Hanjin Group, is just four days away, drawing attention to the battle. As Cho Won-tae, chairman of Hanjin Group, and the shareholder coalition for the normalization of Hanjin Group (the three-party coalition) continue litigation and public opinion battles until the last minute, focus is on the results of lawsuits requesting restrictions on each other's voting rights and the choice of the National Pension Service (2.9%).

According to the business community on the 23rd, Hanjin KAL will hold its 7th regular shareholders' meeting at 9 a.m. on the 27th at the main building of the Hanjin Building in Jung-gu, Seoul. At this meeting, resolutions will be made on the approval of financial statements, appointment of inside and outside directors, approval of director remuneration limits, and partial amendments to the articles of incorporation.

◆ Revealed Shareholding Gap Around 5 Percentage Points = So far, the gap in shareholding ratios between the two sides is known to be around 5 percentage points. Chairman Cho has secured about 37.40% of shares, including his own and related parties' shares (22.45%), friendly forces such as Delta Air Lines (10.00%), Kakao (1.00%), GS Caltex (0.25%), and Korean Air's self-insurance and employee association (3.7%).

The three-party coalition holds 31.98% of shares, consisting of former Vice President Cho (6.52%), private equity fund KCGI (17.29%), and Bando Construction (8.20%). The business community believes that the three-party coalition also has some institutional investors such as asset management companies as friendly forces. It is difficult to determine the outcome based solely on the shareholding gap. Therefore, both sides are intensifying public opinion battles to gain even a 1 percentage point advantage.

◆ Attention on Injunction Lawsuit Results and National Pension Service's Choice = The final variable that will determine the outcome of this shareholders' meeting, regarded as the first round of the management rights dispute, is the injunction lawsuits filed by both sides against each other. On the 12th, the three-party coalition filed an injunction request to restrict voting rights related to Korean Air's self-insurance and employee association, which are considered allies of Chairman Cho, arguing that "these shares are under the influence of the group head and thus related parties but were not properly reported."

On the other hand, Chairman Cho's side has requested the Financial Supervisory Service to investigate, claiming that Bando Construction initially made a false disclosure as a 'simple investor' despite having the purpose of management participation, and requested a stock disposal order for 3.20% of voting rights. Bando Construction also filed an injunction request to allow the exercise of voting rights it holds, seemingly anticipating this. If both sides' requests are accepted, the shareholding gap is expected to be a razor-thin battle within about 1%, according to industry evaluations.

The choice of the National Pension Service, which is known to hold 2.9% of Hanjin KAL shares, is also crucial. The National Pension Service's voting guidelines could influence the votes of other institutional investors and minority shareholders, making it a key issue at the last moment. Currently, both advisory firms (ISS and the Korea Corporate Governance Service) advising the National Pension Service recommend voting in favor of Chairman Cho's reappointment.

◆ Regardless of Outcome, a Long-Term Battle Expected = The industry widely expects that a 'one-shot victory' is unlikely at this shareholders' meeting. Both sides are increasing their shareholdings in preparation for the post-meeting period. Delta Air Lines, an ally of Hanjin Group, has raised its stake to 14.90%. The three-party coalition has also steadily increased its shareholding to 40.12% through recent purchases. An official from the financial investment industry said, "In cases of management rights disputes in other large companies, it rarely ends with just one round. Especially when shareholding ratios are close, as they are now, this is even more true."

However, there are also criticisms that both sides urgently need to resolve the situation somehow, as the aviation industry is on the brink due to COVID-19. A business community official pointed out, "The current situation is like a captain being told to step down while a typhoon is approaching in the vast ocean where the wind can blow at any time," adding, "This is detrimental neither to Korean Air, the domestic flag carrier, nor to the Hanjin Group."

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