KT&G Accepts Private Equity Shareholder Proposal to Separate Ginseng Business

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] A private equity fund established by Lee Sanghyun, former head of The Carlyle Group Korea, has submitted a shareholder proposal to KT&G to separate its ginseng business, the Wall Street Journal (WSJ) reported on the 25th (local time).

According to the report, Flashlight Capital Partners, a private equity fund headquartered in Singapore, sent a letter to KT&G stating that since KT&G's stock price is at a similar level to 15 years ago, it is necessary to focus capabilities on its core business. Flashlight Capital is said to hold about a 1% stake in KT&G.

In the shareholder proposal, Flashlight Capital argued that the sales proportion of alternative products to combustible cigarettes, such as electronic cigarettes, which are the core business, should be raised to at least half by 2027, and efforts to enter the global market should also be expanded. They further pointed out that "it does not make sense for a tobacco company to operate a ginseng-related business," and stated that it is necessary to reorganize non-core businesses such as the ginseng business and real estate development.

Flashlight Capital also demanded that the scale of shareholder returns be increased to three times the current level and that ESG (environmental, social, and governance) be improved. At the same time, they said that shareholders' nominated directors should be included on the KT&G board and added that they plan to recommend individuals with experience in capital markets or public company boards as directors.

Lee Sanghyun, who established Flashlight Capital, led The Carlyle Group Korea from 2011 to 2019 and has worked at the Government of Singapore Investment Corporation (GIC), McKinsey, and Affinity Equity Partners. Flashlight Capital is also known to have held private discussions with KT&G management over the past six months regarding the shareholder proposal.

The WSJ reported that, in addition to Flashlight Capital, asset management firms from the U.S. and Hong Kong, such as Whitebox Advisors and Oasis Management, have also secured stakes in KT&G. Oasis Management stated in a press release, "We believe there is sufficient growth potential in KT&G's business."

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