KCGI’s ascent to intensify family feud over DB control; DB stocks rally

A sibling feud over management control of DB Group is expected to intensify following the ascent of South Korean activist fund Korea Corporate Governance Improvement Fund (KCGI) as the second-largest shareholder of the group’s core business DB HiTek Co. last week, leading the group stocks to rally.

Shares of DB Inc., the holding company of DB Group, finished Monday at 1,950 won ($1.49), up 15.7% from the previous session and 39.5% since March 30. DB HiTek shares also rose for the second straight day on Monday to end at 75,400 won. Over the last three sessions, they jumped 20.1%.

DB and DB HiTek shares were up 0.4% at 1,958 won and 3.7% at 78,200 won, respectively, on Tuesday morning.

The stocks have rallied since KCGI announced on Thursday that it secured a 7.05% stake in DB HiTek for 196.4 billion won, becoming the second-largest shareholder of Korea’s mid-sized semiconductor foundry company, after DB with 12.42%.

The Korean activist fund’s stake purchase in DB HiTek has spurred speculation that DB Group’s family dispute over management control would intensify given the current chairman’s weak grip over the group.  

KCGI-CHAIRMAN KIM ALLY VS FATHER-DAUGHTER UNION

The market is betting that DB Group Chairman Kim Nam-ho will join hands with KCGI to fend off the challenge from Kim Joo-won, the group’s vice chairwoman and the chairman’s older sister, who is expected to team up with the siblings' father and group founder Kim Jun-ki.

The junior Kim ascended to his current chairman position in July 2020 after his father stepped down from the position due to a sexual harassment scandal. Chairman Kim currently holds the largest 16.83% stake in DB, the group’s holding company.

But his father Kim Jun-ki, the former chairman, last year upped his stake in DB from 11.61% to 15.91% to become the second largest shareholder, stirring speculation that he might have formed an alliance with his daughter against his son. Combined with the group vice chairwoman’s 9.87%, the father-daughter’s combined stake in DB amounts to 25.78%, more than the junior Chairman Kim’s stake.

Chairman Kim’s grip over DB HiTek is weak. He does not have direct stake ownership in the chip foundry business but only through DB, which holds 12.42%. His father and sister own 3.61% and 0.39%, respectively, in DB HiTek.

This is in contrast to his stronger reign over DB Insurance Co., the crown jewel of DB Group’s financial business, and DB.  

Despite his departure, the group founder and former chairman’s control of the group’s manufacturing units remains strong, posing a threat to his son’s leadership in the group.

Chairman Kim’s sister and Vice Chairwoman Kim Joo-won joined in the group's management in July last year after she took the helm of DB HiTek’s American operations in 2021.

Against this backdrop of the current stake structure, Chairman Kim and KCGI could partner, a move that is expected to render the activist fund the final winner in the owner family’s power struggle, market analysts suspect.

KCGI led by Kang Sung-boo became famous after it joined hands with Cho Hyun-ah a few years ago in a management coup to oust her younger brother, Hanjin KAL Chairman Cho Won-tae. Hanjin KAL is the parent company of Korea’s largest full-service airline Korean Air Lines Co.

The fund, however, gave up its initial attempt to change the leadership of Hanjin KAL in 2021 and sold its 17.41% stake in the Hanjin Group holding company last year.

Write to Ji-Eun Ha at hazzys@hankyung.com

Sookyung Seo edited this article.