Hankook prepared to defend MBK Partners’ takeover bid: Chairman Cho

Cho Hyun-bum, chairman of Hankook & Company Co., the holding firm of South Korea’s top tire maker Hankook Tire & Technology Co., said on Thursday he is confident of thwarting private equity firm MBK Partners Ltd. and his elder brother’s bid to acquire control of the parent company.

“We’re fully prepared,” he told reporters on the sidelines of his appearance at Seoul Central District Court.

He’s on trial on charges of embezzlement, breach of trust and unfair business practices. Earlier this year, he was arrested, prosecuted and detained. Last month, he was released on bail.

“MBK has gone out of its way to join hands with my elder brother in a contract, in which the reputable private equity firm has nothing to lose even if things go wrong,” Cho told reporters. “I’m concerned that such a deal would lead to heavy losses for individual investors.”

BATTLE OVER MANAGEMENT CONTROL

Last week, Cho Hyun-sik, the eldest son of the tire maker’s honorary chairman and an advisor to Hankook & Company, said in a regulatory filing that he and MBK Partners would jointly buy the holding firm’s shares to gain management control and remove Cho Hyun-bum, his younger brother, from his post as group chairman.

MBK, in cooperation with Cho Hyun-sik, said it is seeking to acquire a majority stake in Hankook & Company, by purchasing its shares from investors in the market.

The Seoul-based private equity firm said 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 Thursday, it finished 2.1% lower at 21,150 won.

Ventura Co., a special-purpose company created by MBK’s 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 ($395 million).


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.

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

MBK-backed Ventura, Cho Hyun-sik and his sister Cho Hee-won, who has a 10.61% stake in Hankook & Company, have 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.

FATHER TO THE RESCUE

The sibling rivalry took a new turn this Tuesday, when their father Cho Yang-rai, the holding firm’s honorary chairman, vowed to throw his support behind Cho Hyun-bum, his second son and chairman of Hankook & Company.

Cho Yang-rai, who remains out of public view amid speculation that he shows signs of dementia, said he would use his wealth to buy Hankook & Company’s shares to defend Cho Hyun-bum, according to people familiar with the matter.

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

Cho Hyun-bum said on Thursday outside the Seoul court that he would not amass Hankook & Company shares to counter MBK’s bid for the time being.

“I don’t think my father needs to use his wealth to buy the shares. We’re fully prepared.,” he said.

Industry officials are closely watching to see if MBK will raise its bidding price as the share price has already risen above its proposal.

Given the timeframe stipulated by related regulations, the PEF is required to decide by the end of this week.

MBK and Cho Hyun-sik may find it hard to acquire enough shares in Hankook & Company for management control.

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.

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 Si-On Park, Il-Gue Kim and Jun-Ho Cha at ushire908@hankyung.com

In-Soo Nam edited this article.