Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Struggle continues over control of Hankook Tire
Cho Yang-rae, left, honorary chairman of Hankook & Company, and Michael ByungJu Kim, founder and chairman of MBK Partners
By Baek Byung-yeul
The family struggle over control of Hankook & Company, which had initally appeared to be settling down with the father siding with the current chairman, is reaching another stage as private equity company MBK Partners raised the price of its public tender offer, according to industry officials, Sunday.
On Friday, Ventura, an investment firm established by MBK Partners, reported to the Financial Supervisory Service (FSS) that it would raise the tender offer price for its stake in Hankook & Company from 20,000 won ($15.40) per share to 24,000 won. Hankook & Company is a holding company of Hankook & Company Group, which has Hankook Tire & Technology, the country's largest tire manufacturer, as its crown jewel affiliate.
MBK has been vying for shares with Chairman Cho Hyun-bum of the company since Dec. 5. It launched a public tender offer conducting a public purchase as it teamed up with Cho Hyun-sik, the eldest son of honorary Chairman Cho Yang-rae and adviser of Hankook & Company, and Cho Hee-won, the daughter.
The adviser holds 18.93 percent of the shares in Hankook & Company, and his sister holds 10.61 percent. MBK announced that it would acquire up to 27 percent of the shares in addition to their combined 29.54 percent stake to secure control.
However, with the share price exceeding the initial tender offer price of 20,000 won proposed by MBK, market interest has been focused on whether MBK would raise the price higher.
Furthermore, on Dec. 12, the honorary chairman stated that he would respond directly if MBK raises the tender offer price, effectively supporting the management rights of Chairman Cho, who currently holds a 42.03 percent stake in the company.
On Dec. 14, it was revealed through a disclosure by the FSS that the 86-year-old honorary chairman had acquired 2.72 percent of Hankook & Company's shares for 57 billion won on Dec. 7. As a result, the stake of Chairman Cho and his allies increased from 42.89 percent to 45.62 percent.
MBK Partners said it raised the tender price to 24,000 won. "Hankook & Company’s strong fundamentals and sustainable growth potential are difficult to realize under the current governance structure," it stated.
"The purpose of this public tender offer is to improve the corporate governance structure of Hankook & Company.”
Industry views predict that Chairman Cho will have no significant difficulty in securing more than 50 percent of the shares needed to defend his management rights. On Friday, a day after the honorary chairman's stock purchase became known, Hankook & Company's stock price ended at 15,850 won, down 25.06 percent from the previous day.
The chairman actually showed confidence that he could wrap up this conflict well, saying that it is fully possible to defend his management rights.
“I am concerned that retail investors will be impacted by the unreasonable attempts of a reputable private equity fund,” the chairman told reporters at the Seoul Central District Court on Dec. 14. Cho visited the court to attend a hearing for his trial on charges of unfair support for affiliates, embezzlement and breach of trust.
"The preparations for defending management rights are finished," the chairman said. "We have sufficient financial resources."
Ventura will purchase Hankook & Company's shares in a public tender offer by Dec. 24.