Cho Yang-rai to fight back in MBK Partners’ bid to acquire Hankook Tire

Cho Yang-rai, honorary chairman of Hankook & Company Co., has vowed to fight MBK Partners Ltd.’s bid to take over the holding company of South Korea’s top tire maker Hankook Tire & Technology Co.

MBK, in cooperation with Cho’s eldest son, Cho Hyun-sik, is seeking to acquire a majority stake in Hankook & Company, by purchasing its shares from investors in the market for up to 518.6 billion won ($395 million).

The Seoul-based private equity firm said last week that it would buy the holding firm’s shares at 20,000 won apiece. But the stock surged by the daily limit of 30% to 21,850 won on the day of the bid announcement. On Tuesday, it finished 6.9% lower at 21,000 won.

If MBK raises its bidding price, Cho Yang-rai will use his wealth to buy Hankook & Company’s shares at higher prices to defend Cho Hyun-bum, his second son and chairman of the company, industry sources said.

“I cannot give up a company that I have worked for throughout my life to a PEF,” the honorary chairman was quoted as telling one of the people familiar with the matter.

"If MBK increases its takeover price, I’ll step in and settle the matter personally,” he was further quoted as saying.

SIBLING RIVALRY

In a regulatory filing last Tuesday, Cho Hyun-sik, the eldest son and an advisor to Hankook & Company, said he and MBK Partners would jointly buy the company’s shares to gain management control and remove his younger brother from his post as group chairman.

Ventura Co., a special-purpose company created by MBK Partners’ special situations fund MBKP SS, aims to buy Hankook & Company shares to own a stake between 20.35% and 27.32% by spending as much as 518.6 billion won, the regulatory filing showed.

If all goes to plan, Cho Hyun-sik’s stake in the holding company will rise from the current 18.93% to between 39.28% and 46.25%. When combined with the stakes held by his friendly shareholders, he would control between 49.89% and 56.86% of the company, the filing showed.

His sister Cho Hee-won, siding with Cho Hyun-sik, has a 10.61% stake in Hankook & Company.

FAMILY FEUD BEGAN IN 2020

The family feud began in June 2020 when their father and then Chairman Cho Yang-rai, now 86, handed over his entire stake in Hankook & Company to Cho Hyun-bum, the second son, and named him to lead the company.

Cho Hyun-bum, now chairman of the group, owns 42.03% of Hankook & Company as the company’s single largest shareholder.

The elder son, Cho Hyun-sik, and his other sister Cho Hee-kyung, chief of Hankook Tire Foundation, cried foul, objecting to their father’s move.

She has a 0.81% stake in Hankook & Company.

At the annual general shareholders’ meeting in March 2021, the elder son tried to oust his younger brother but the bid came to nothing after losing a vote on the formation of the board of directors.

LABOR UNION OBJECTS TO MBK’S BID

MBK Partners-backed Ventura, Cho Hyun-sik and Cho Hee-won on Nov. 30 agreed that if they successfully acquire enough shares through open bidding, MBK will control the holding company and name a new chief executive to replace Cho Hyun-bum.

Those who wish to sell their shares in Hankook & Company to Ventura must file a request with Korea Investment & Securities Co. by Dec. 22, two days ahead of the deadline as Dec. 24 is a Sunday.

Industry watchers said MBK and Cho Hyun-sik may find it hard to acquire enough stakes in Hankook & Company now that Cho Yang-rai has vowed to throw his support behind his second son and the current chairman.

“The father handed over management control to his second son in belief that Cho Hyun-bum was the right man,” said one of the people familiar with the matter.

With an additional 8% stake through a direct share purchase or supported by his friendly shareholders, Cho Hyun-bum will own more than a simple majority of the company, easily defending his chairmanship.

MBK is known to have set its upper limit on its spending plan at about 560 billion won.

Meanwhile, Hankook Tire’s labor union issued a statement on Monday, saying that it flatly opposes “any hostile M&A attempt.”

Hankook & Company has a controlling 30.67% stake in Hankook Tire, the world’s sixth-largest tire maker.

Write to Il-Gue Kim and Jun-Ho Cha at Black0419@hankyung.com

In-Soo Nam edited this article.