[BizHanKook] Hoban Group has become the largest shareholder of Hanjin KAL. On November 2, Hoban Group increased its stake to 20.69% through its affiliates. The combined stake of Hanjin Group Chairman Cho Won-tae and his related parties, who were the previous largest shareholders, stands at 20.58%. Hanjin KAL serves as the holding company for the Hanjin Group. With this change in the largest shareholder, the possibility of a shift in Hanjin Group's management control is being discussed.
However, the change in the largest shareholder does not immediately imply a transfer of management control. This is because major shareholders of Hanjin KAL, such as Delta Air Lines of the U.S. and the Korea Development Bank (KDB), currently support Chairman Cho. Hoban Group also maintains the position that its stake purchase is for simple investment purposes, leaving it uncertain whether this will lead to an actual management dispute.
Hoban claims "simple investment," but are there "other intentions"?
Hoban Group began investing in Hanjin KAL in 2022. At the time, it acquired a 13.97% stake held by the activist private equity fund KCGI for approximately 564 billion won. Since then, Hoban Group has consistently purchased Hanjin KAL shares through its affiliates, indicating that its investment was not a one-time event.
Hoban Group has consistently disclosed its investment purpose as a "simple investment." However, with the group surpassing Chairman Cho Won-tae to become the largest shareholder, industry observers are questioning whether there are other intentions, such as securing management control. In this situation, Chairman Cho has also moved to increase his stake in Hanjin KAL. On November 2, he announced the purchase of 325,000 common shares of Hanjin KAL (a 0.49% stake) at 114,000 won per share.
Once the transaction is completed as planned, the combined stake of Chairman Cho and his related parties will rise from the current 20.58% to approximately 21.07%. If Hoban Group does not acquire additional shares, Chairman Cho will reclaim his status as the largest shareholder. In his disclosure, Chairman Cho stated that the reason for the stake purchase was to "strengthen responsible management."
However, since the gap in ownership is narrow, Hoban Group could reclaim the top spot if it decides to purchase more shares. With Hanjin KAL's stock price recently surging, the financial burden for acquiring additional shares has also increased.
Is time on Hoban Group's side?
Although the largest shareholder of Hanjin KAL has changed, analysts believe there is little chance of an immediate shift in Hanjin Group's management control. Delta Air Lines holds a 14.90% stake, and KDB holds 10.58%; both are considered friendly shareholders to Chairman Cho. As long as they support him, it is realistically difficult for Hoban Group to secure control of the Hanjin Group.
Delta Air Lines is a strategic partner that has maintained a long-term cooperative relationship with Korean Air. KDB injected funds into Hanjin KAL while supporting Korean Air's acquisition of Asiana Airlines. Given these relationships, observers believe it is unlikely that Delta and KDB will withdraw their support for Chairman Cho in the short term.
Park Se-yeon, a researcher at Hanwha Investment & Securities, explained, "Changing the largest shareholder is different from changing the composition of votes at a general shareholders' meeting. The largest shareholder is simply the one with the highest combined stake, while the outcome of director appointments depends on the votes of other shareholders like Delta and KDB." She added, "The current management (Chairman Cho) would only face weakened defenses if they violate agreements with KDB or if friendly votes break away during the shareholders' meeting."
However, Chairman Cho's situation is not entirely optimistic. There is no guarantee how long Delta Air Lines will continue to support him. With Hanjin KAL's stock price rising sharply, the possibility of Delta selling its stake is being discussed. Researcher Park Se-yeon stated, "Delta Air Lines reported its purpose for holding Hanjin KAL shares as a simple investment, and it is not a joint holder with Chairman Cho. If Delta turns neutral, Hoban Group would surpass the Chairman even by just buying KDB's stake, and if Delta sells to Hoban, they would lead even without KDB's shares."
Furthermore, because Hoban Group is a corporation while Chairman Cho is an individual, there is a difference in their available financial resources. Chairman Cho borrowed significant funds using his shares as collateral during the inheritance process of his Hanjin KAL stake. Consequently, maintaining his stake comes at a substantial cost. Kim Soo-hyun, a researcher at DS Investment & Securities, analyzed, "There is a growing market opinion that time is in Hoban's favor. The consensus is that as time passes, Hoban Group can significantly increase its bargaining power simply by maintaining its current stake."
Will minority shareholders benefit?
Hoban Group has never publicly declared an intention to participate in Hanjin Group's management. In its disclosures, it has also stated the purpose of its share purchases as a "simple investment." However, it has not explicitly ruled out future participation in management. Given that Hoban has reached the top shareholder position, the industry is speculating about the possibility of them seeking management involvement in the future.
If a management dispute were to occur between Hoban Group and Chairman Cho Won-tae, the exercise of voting rights by other shareholders would play a crucial role. In particular, interest is focused on KDB's next move. KDB's 10.58% stake in Hanjin KAL is significant. KDB became a major shareholder to support structural reorganization during Korean Air's acquisition of Asiana Airlines and is still considered a friendly shareholder to Chairman Cho. However, as a state-run bank, it is expected that KDB will divest its Hanjin KAL shares in the long term.
If Hoban Group acquires KDB's stake, it would place a significant burden on Chairman Cho in defending his management rights. Conversely, it would not be easy for Chairman Cho to acquire KDB's stake himself. Based on recent market prices, KDB's stake is worth over 1.3 trillion won.
KDB stated, "We have no plans to sell our stake until the structural reorganization of the aviation industry is complete." Therefore, the direction of KDB's stake disposal after the reorganization is complete will be a major variable. If Chairman Cho cannot acquire KDB's stake himself, he can only hope that a neutral third party acquires it.
Since the gap between Hoban Group and Chairman Cho is narrow, the sentiment of minority shareholders will also play an important role. Consequently, minority shareholders of Hanjin KAL are anticipating increased shareholder returns. Yang Seung-yoon, a researcher at Eugene Investment & Securities, noted, "There is a possibility that the race for stake acquisition will continue until December 31, the record date for voting rights for the annual general meeting. As the incentive to improve shareholder value has grown during the process of stabilizing the largest shareholder status, I am paying attention to the possibility of Korean Air strengthening its shareholder return policy."