Corporate restructure inevitable at Smilegate as founder faces divorce

South Korea's fifth-richest man Kwon Hyuk-bin and his wife Lee Hwa-jin appear to be headed for divorce, according to industry insiders on Monday. 

The self-made billionaire is the founder and chief visionary officer (CVO) of Smilegate Holdings Inc., the country's third-largest gaming company. 

The company is best known for Crossfire, a first-person shooter (FPS) game with over six million concurrent players across the globe. Other popular titles include Lost Ark, a Massively Multiplayer Online Role-Playing Game (MMORPG), and WarReign, a Real Time Strategy (RTS) game. 

If and when the divorce is finalized, the asset amount to be divided is estimated to be the largest so far in the history of divorces in Korea. 

According to Forbes, Kwon is worth around $6.1 billion as of this year. 

Kwon's wife Lee had allegedly asked for a provisional disposition of the Seoul Family Court that would prevent Kwon from selling his shares of Smilegate until the divorce and the division of assets are finalized, which the court approved based on legal citations. 

A provisional or temporary disposition prohibiting the unloading of stocks is the first step in most divorce proceedings of the rich and famous. 

Those familiar with the development told The Korea Economic Daily that each side has appointed multiple law firms. 

As of late last year, Smilegate Holdings generated 1.43 trillion won ($1.08 billion) in revenue and reached 593 billion won ($448.2 million) in operating profit. 

The corporate value of Smilegate is forecast to exceed 10 trillion won ($7.55 billion), meaning that if Lee asks for half of her husband's stakes in the company he founded, it will be valued at least 5 trillion won. 

Kwon married Lee in 2001 and they have two children together. 

The 48-year-old founded Smilegate a year after his marriage and still wholly owns the gaming giant.

SELF-MADE 

The largest division of assets so far in Korea was between President and Chief Executive of Hotel Shilla Lee Boo-jin and her then-husband Lim Woo-jae who was dubbed “Mr. Cinderella” by the local media due to his relatively humble upbringing. 

Lim was an employee of a Samsung Group security service affiliate at the time of their marriage.

During the divorce proceedings, Lim asked for half of his estimate of the Samsung heir’s assets worth 2.5 trillion won.

But the court ordered Lee to pay him 14.1 billion won from asset division, which at the time only amounted to around $11.7 million, by excluding most of the shares that Lee possessed prior to her marriage from the assets to be considered for division. 

SK Group Chairman Chey Tae-won is currently in the middle of divorce proceedings with his wife Roh Soh-yeong, the founder and director of Art Center Nabi.

In 2020, the daughter of former President Roh Tae-woo requested a provisional disposition that blocks Chey from selling his 6.5 million shares in the SK Group's holding company. The court ruled in April that Chey cannot arbitrarily unload 3.5 million shares out of the total he owns.

Roh has subsequently requested an 8% stake in SK Inc., half of Chey’s ownership in the group. 

As Korea's second-largest conglomerate, SK Group has a market capitalization of $9.85 billion. 

Kwon’s proceedings differ from the previous asset divisions as they do not involve a chaebol,  or a large family-owned Korean business conglomerate. 

In the case of self-made billionaire Kwon, the percentage of his separate property out of his entire assets is estimated to be much lower than that of the conglomerate heirs, as most of his wealth has been accumulated since his marriage to Lee. 

Separate property refers to that owned by each spouse before their marriage, therefore not considered as community property shared between the two. 

Industry watchers say Kwon will no longer have 100% ownership of the company he founded following the division of assets. 

Whether or not Smilegate is exposed to ownership disputes by inviting outside shareholders, restructuring of the gaming juggernaut appears inevitable.

Write to Jun-Ho Cha, Jin-Hyoung Cho at chacha@hankyung.com
Jee Abbey Lee edited this article.