Skip to content
  • KOSPI 2746.63 +0.81 +0.03%
  • KOSDAQ 905.50 -4.55 -0.50%
  • KOSPI200 374.63 +1.41 +0.38%
  • USD/KRW 1347.5 -3.5 -0.26%
  • JPY100/KRW 890.35 -2.08 -0.23%
  • EUR/KRW 1452.94 -4.59 -0.31%
  • CNH/KRW 185.75 -0.28 -0.15%
View Market Snapshot
Shareholder activism

Local activist fund announces tender offer for 1.2 million warrants in Korean Air's parent company

By Jul 23, 2020 (Gmt+09:00)

2 Min read

A Korean activist fund that failed to oust Hanjin KAL's current management during a shareholder meeting in March is trying to increase its stake in the company.

The Korea Corporate Governance Improvement (KCGI) and mid-sized builder Bando Engineering & Construction jointly announced a public tender offer for 1.2 million warrants worth approximately 30 billion won ($25 million) in Hanjin KAL, the parent company of Korean Air, on July 23.

KCGI is offering 25,000 won per warrant, which is about 11% higher than the market's closing price of 22,900 won on July 22.

On July 3, Hanjin KAL issued 300 billion won worth of bonds with 3,636,363 detachable warrants to secure funds for Korean Air's capital increase. This is part of the cash-strapped carrier's self-rescue measure to raise 1.15 trillion won by issuing new shares aided by Hanjin KAL's participation.

The tender offer comes amid an ongoing feud to gain control in Korean Air between Chairman Won-tae Cho and the three-party shareholder alliance which wants to overhaul the company's governance structure.

The alliance includes KCGI, Bando, and Hyun-ah Cho, the former vice president of Korean Air and Chairman Cho’s elder sister.

KCGI is the second-largest shareholder with a 19.55% stake in Hanjin KAL. The alliance holds a combined 45.23% stake and 446,235 warrants in Korean Air.

The tender offer, if it goes as planned, will give a boost to the alliance as they would secure 1.64 million warrants in total and be able to acquire an additional 2.8% stake after paying the exercise price of 82,500 won per warrant.

This would raise the alliance's combined stake to 46.71% in total.

A warrant is a security that offers investors the right to purchase new shares of a company at a predetermined price. An investor with a single warrant is eligible to purchase a single common share of a company at a fixed price.

Chairman Cho may find it challenging to defend his position if the tender offer is successful. Cho and his affiliates hold a combined 28.93% stake and they will need to bring in more white knights in addition to Delta Airlines - which holds a 14.90% stake - to successfully ward off the alliance's attempt to sack the board members.

“The current management cannot resolve the crisis that Hanjin Group is facing. We are hoping to secure control through this tender offer and establish a sound governance structure that Hanjin KAL deserves,” explained KCGI.

The KCGI-led alliance has been committed to winning the proxy fight against the incumbent management. The alliance failed to replace the company's board members including Chairman Cho at the annual shareholder meeting in March.

However, the alliance is seeking to increase its footing through the tender offer which would provide an opportunity for them to gain control by holding a temporary shareholder meeting.

KCGI first purchased shares in Hanjin KAL in November 2018, making headlines because it was the first time a domestic private equity fund had contested the management of local conglomerates.

Write to Taeho Lee at thlee@hankyung.com

Danbee Lee edited this article

Comment 0
0/300