'Kumho Petrochemical Shareholder Proposal' Cha Partners "Appointment of Audit Committee Members and Treasury Stock Cancellation" (Comprehensive)

Kim Kyung-ho, Chairman of KB Financial Group Board, Recommends Audit Committee Member
"81% of Shares Held by Common Shareholders... No Independent Directors"
"Treasury Shares Should Be Cancelled to Address Undervaluation"

Cha Partners Asset Management announced to Kumho Petrochemical that it will "appoint independent outside directors (and audit committee members) to represent the interests of common shareholders holding more than 80% of the shares, in order to prevent and check management and the board of directors from actions that damage shareholder value."

Cha Partners is an activist fund delegated with shareholder proposal rights by Park Cheol-wan, former executive director and nephew of Park Chan-gu, chairman of Kumho Petrochemical, who is the largest individual shareholder of Kumho Petrochemical. Park Cheol-wan holds 9.1% of Kumho Petrochemical shares as the largest individual shareholder, and including related parties such as Cha Partners (0.03%), the total shareholding ratio is 10.88%.

On the morning of the 4th, Cha Partners held a press conference at the IFC in Yeouido, Seoul, stating that "Kumho Petrochemical's stock price has fallen about 58% from the peak over the past three years as of the end of January, and the total shareholder return (TSR) ranks at the bottom compared to other chemical companies, deepening the undervaluation issue," and explained the three shareholder proposals: ▲appointing an outside director who will serve as an audit committee member ▲amending the articles of incorporation related to treasury stock cancellation ▲cancellation of treasury stock.

[Provided by Cha Partners Asset Management]

First, Cha Partners recommended candidate Kim Kyung-ho, currently chairman of the board (audit committee member) of KB Financial Group, as an outside director who will serve as an audit committee member of Kumho Petrochemical (separately elected under the 3% rule). The 3% rule requires listed companies to elect at least one audit committee member separately from other directors, and limits the voting rights of controlling shareholders to a maximum of 3% regardless of their shareholding ratio in this election.

Kim Hyung-kyun, head of Cha Partners who conducted the briefing, said, "Although the shareholding ratio of common shareholders of Kumho Petrochemical, numbering about 100,000 (common stock shareholders), is 81%, there is not a single independent director representing the rights of common shareholders among the 10 seats on the board." He added, "The board has been reported to have disposed of treasury stock to defend management rights amid undervaluation caused by excessive un-cancelled treasury stock holdings. In 2022, it announced the possibility of additional treasury stock disposal for mid- to long-term growth strategies."

Kim Hyung-kyun, Head of Cha Partners Asset Management, is holding a press conference regarding Kumho Petrochemical's shareholder proposal on the morning of the 4th at IFC Mall in Yeouido, Seoul.
Photo by Kim Dae-hyun kdh@

He also pointed out, "The board tolerated illegal employment by Chairman Park Chan-gu for a staggering 54 months since the end of 2018," and "there are concerns about loss of independence of the board as it gave 100% approval for the appointment of Park Jun-kyung, the chairman’s son and direct beneficiary of the criminal act, as an inside director."

Regarding candidate Kim Kyung-ho, he emphasized, "He has a track record of significantly enhancing shareholder value at KB Financial Group and possesses expertise in accounting and auditing. If appointed as a separately elected outside director, he will greatly contribute to protecting and increasing overall shareholder value at Kumho Petrochemical’s board."

Cha Partners proposed amending the articles of incorporation to allow cancellation of treasury stock not only by board resolution but also by shareholder meeting resolution, and proposed to cancel all treasury stock held by Kumho Petrochemical in stages over two years after the amendment.

Kim said, "The biggest cause of undervaluation is the large amount of un-cancelled treasury stock, which accounts for 18.4% of Kumho Petrochemical’s issued shares," and "Kumho Petrochemical is not properly valued in the market due to concerns that long-held treasury stock may be disposed of or sold to third parties to defend the controlling family’s management rights." "Cancelling treasury stock is the most effective and easiest way to enhance shareholder value and resolve the Korea discount, and it can immediately increase shareholder value without additional expenditure."

He also emphasized that the main purpose of this shareholder proposal is to increase overall shareholder value, not a management rights dispute. Kim said, "Park Cheol-wan has previously made shareholder proposals recommending a majority of board members as part of a management rights dispute," and "this proposal is an effort from the minority shareholders’ perspective to enhance overall shareholder value."

He added, "Cha Partners will not stop at this regular shareholder meeting proposal but will continue to play a monitoring and checking role as a shareholder for the sustainable development of Kumho Petrochemical and enhancement of shareholder value as a long-term investor."

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