D-1, Hanjin Kal and KCGI Face Off Again After 2 Years

Shareholders' Meeting Held on the 23rd... Proposal for KCGI Director Appointment
Termination of Tripartite Alliance Agreement... Hanjin Kal Expected to Prevail

On the 27th, shareholders and executives are moving inside the building at the 'Hanjin KAL 7th Regular General Meeting of Shareholders' held at the Hanjin Building Main Office in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Hyunseok Yoo] Hanjin KAL, the holding company of Hanjin Group, is set to face off again with KCGI at the shareholders' meeting after more than two years. This shareholders' meeting is expected to favor Hanjin KAL. The tripartite alliance ended their joint shareholding agreement last year, leaving it uncertain whose side they will support, and there is a prevailing expectation that the Korea Development Bank will back Hanjin KAL.

According to the business community on the 22nd, Hanjin KAL will hold its regular shareholders' meeting at 9 a.m. on the 23rd at its headquarters in Jung-gu, Seoul. The agenda will include the appointment of outside directors and inside directors, partial amendments to the articles of incorporation, and approval of the directors' remuneration limit.

KCGI, a major shareholder of Hanjin KAL, has submitted shareholder proposals again after two years. The main proposals include recommending Professor Seo Yoon-seok of Ewha Womans University as an outside director candidate, introducing electronic voting, and strengthening board eligibility criteria to prevent individuals convicted of breach of trust or embezzlement with a prison sentence from becoming directors. Professor Seo was also recommended by KCGI as an outside director in 2020.

KCGI explained the purpose of their shareholder proposals by stating, "Despite the clear performance improvement of the major affiliate Korean Air, Hanjin KAL recorded operating losses of 220 billion KRW and 163 billion KRW on a cumulative basis at the end of 2020 and the third quarter of last year, respectively," and added, "The recent appointment of President Cho Hyun-min at Hanjin, an affiliate, raises concerns about a regression in the governance reform of Hanjin Group."

In terms of simple shareholding, Hanjin KAL holds an advantage. Chairman Cho Won-tae of Hanjin Group and related parties hold 20.93%. Excluding former Korean Air Vice President Cho Hyun-ah's shares (2.06%), it is 18.87%. Former Vice President Cho Hyun-ah contested the vote against Chairman Cho Won-tae's side along with KCGI and Bando Construction at the 2020 shareholders' meeting. Meanwhile, Grace Holdings (KCGI) holds 17.41%, so Hanjin KAL is currently in a favorable position.

Looking at the shares during past disputes, KCGI had the advantage. Adding Delta Air Lines' (13.21%) shares to Chairman Cho Won-tae's friendly shares brings the total to 32.08%. On the other hand, KCGI's 17.02% from Daehogae Development (Bando Construction) combined with former Vice President Cho Hyun-ah's shares totals 36.49%, a difference of 4 percentage points. However, the participation of Bando Construction and former Vice President Cho, who previously joined the tripartite alliance, is uncertain. In April last year, the tripartite alliance decided not to extend their shareholder agreement as the joint holding contract expired.

Furthermore, the Korea Development Bank's shares are likely to support Hanjin KAL. The bank invested 800 billion KRW in Hanjin KAL to support Korean Air's acquisition of Asiana Airlines, securing a 10.58% stake. Since Korean Air is proceeding with the acquisition of Asiana Airlines, it is expected that the bank will not exercise unnecessary voting rights.

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