Hanjin KAL loses one-third of value as management issues fade

Shares in South Korea’s Hanjin KAL Co. have wiped out one-third of its value in the past two weeks after one of its major shareholders, once a threat to the company’s top management, unloaded most of its shares in the holding firm of Korean Air Lines Co.

Medium-sized builder Bando Group sold a 15.75% stake in Hanjin KAL on Aug. 26 in block trade to institutional investors for 672 billion won ($490 million). Its buyers include Delta Air Lines Inc. and LX Pantos Co., a logistics company.

Following the block sale, the Hanjin KAL stock has been on a downward run in the past nine sessions in a row and slid 33%. On Thursday, it edged down to close at 40,900 won, its lowest level in more than two and a half years.

That compared with a meager 0.4% slip in the broader Kospi index during the same period.

Bando’s disposal of Hanjin KAL shares signaled an end to a years-long family feud over the management rights to the country’s largest air carrier.

Bando had threatened CEO Cho Won-tae’s management in a three-way alliance with his elder sister Cho Hyun-Ah and a local activist fund. But it failed to secure control of the company during a proxy fight at a 2020 shareholder meeting.

Now Bando's ownership of Hanjin KAL decreased to 0.99%.

VALUATION LOSSES

Excluding Delta and LX Pantos, unidentified institutional investors bought a combined 10.47% stake in Hanjin KAL from Bando Group last month. 

They acquired the shares at 62,500 won apiece, or a 5% premium over the previous day’s closing price. Their shares in Hanjin KAL are now estimated to have lost about 130 billion won ($95 million) in valuation.

Now Bando is out of the picture, market analysts said that there is little room for Hanjin KAL shares to rebound to the levels reached when the company was involved in a battle over its management rights.

The balance of borrowed but unreturned Hanjin KAL shares has increased to 2.9 million shares as of Sept. 7, versus 2.3 million shares on Aug. 26. Market speculation is that the borrowed stocks might be short-sold by those betting on the stock's further decline. 

CEO Cho and his friendly shareholders control nearly 50% of the holding company, including his 5.78% stake and Delta's 14.79%.

Delta is believed to play the role of a “white knight” for CEO Cho if a proxy contest occurs over the management of Korean Air and its parent Hanjin Group.

Meanwhile, LX Pantos shrugged off the steep decline in Hanjin KAL shares, saying it bought the shares as a strategic investor to expand its logistics business.

Write to Ik-Hwan Kim and Eui-Myung Park at lovepen@hankyung.com
Yeonhee Kim edited this article