Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Hanjin to undergo drastic ownership changes
From left are the late Hanjin Group Chairman Cho Yang-ho's first daughter Heather Cho, son and Korean Air President Cho Won-tae and second daughter Emily Cho. Yonhap
By Nam Hyun-woo
3 children of late chairman expected to pay $160 mil. in tax to inherit shares
By Nam Hyun-woo
The abrupt death of Hanjin Group Chairman Cho Yang-ho is expected to put the aviation giant's management and ownership structure in chaos. His son and Korean Air President Cho Won-tae is thus expected to be named as the group's head much earlier than expected, analysts said Monday.
They said Cho Won-tae's successful succession and the stabilization of Hanjin Group and its unit Korean Air hinge on how he will address the massive inheritance tax stemming from acquiring controlling group shares held by the late chairman.
According to Korean Air, Cho died in a hospital in Los Angeles from lung disease at the age of 70.
Less than a month ago, he was stripped of his Korean Air CEO title and board membership by investors during a shareholder meeting, but he still had controlling rights of the group and the carrier as the chairman.
Also, he was a board member of six Hanjin Group units, including the group's de facto holding firm Hanjin KAL and low-cost carrier Jin Air.
“Given Cho's personal network and experience of nurturing Korean Air as one of the major carriers in the world, his death will likely affect the group,” an aviation company official said.
According to Hanjin Group officials, the group will likely speed up his son Won-tae's succession, given his experience leading Korean Air as a CEO since 2017.
Cho's debut as the head of Hanjin Group and Korean Air is expected to be made at the 75th International Air Transport Association Annual General Meeting hosted by Korean Air in Seoul on June 1.
Analysts said, however, the junior Cho's succession as the largest shareholder of the group will not likely be smooth, because setbacks remain regarding inheriting Hanjin KAL's controlling stake held by his father, which is key in defending the group's managing rights.
“The owner family's status as the largest shareholder of the group is under threat,” eBest Investment & Securities analyst, Song Chi-ho, said.
Currently, the late chairman holds a 17.84 percent stake in Hanjin KAL, which accounts for the majority of the 28.95 percent stake held by him and his family members. With the 28.95 percent stake, he held the managing rights of the group, because Hanjin KAL owns a nearly 30 percent stake in Korean Air. Since Cho Won-tae's stake remains at 2 percent, it is necessary for him to collect his father's 17.84 percent.
“If his offspring opts to pay half of the stake as a 50 percent inheritance tax, the family's stake in Hanjin KAL will drop to 20.03 percent,” Song said. “If the No. 2 and No. 3 shareholders join hands, their combined stake stands at 20.81 percent, which is greater than that of the owner family.”
Hanjin KAL's No. 2 shareholder is private equity fund KCGI with 13 percent, followed by the National Pension Service with 7.3 percent. The two stakeholders led an investors' campaign to dethrone the late Cho from the Korean Air CEO post after his indictment for embezzlement charges and the public misbehavior of his daughters ― Heather Cho and Emily Cho ― including in the “nut rage” incident.
The shareholders will likely test the Cho's grip on the group during next year's annual general meeting, when his current term as an inside director of Hanjin KAL expires.
KB Securities analyst Kang Seong-jin estimated that the CEO is likely to pay 162.5 billion won in tax for inheriting his father's stake, and they will have to rely on other assets to keep hold of it.
“If the inheritance process does not go smoothly, KCGI's influence in the group will grow fast,” Kang said.