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.
LS, LIG join hands amid suspicions over Hoban’s aggressive moves
Heads of GS, LG, LIG and LS groups attend a ceremony to commemorate GS Group's 20th founding anniversary in Gangnam District, Seoul, Friday. From left are LS Group Chairman Koo Jae-eun, LIG Group Chairman Koo Bon-sang, LG Group Chairman Koo Kwang-mo and GS Group Chairman Huh Tae-soo. LS, LIG and GS groups were spun off from LG Group. Courtesy of GS Group
By Nam Hyun-woo
LS Group and LIG Group have formed a strategic partnership across their business portfolios in what appears to be an effort to counter construction conglomerate Hoban Group’s aggressive stake-building in LS’ holding firm.
According to LS Group and LIG Group on Monday, the two sides recently signed a memorandum of understanding (MOU) for “strategic alliance and comprehensive cooperation to support mutual growth and development between the two groups.”
LS and LIG were spun off from LG Group in 2003 and 1999, respectively, and both are led by members of the LG founder Koo family. LS is a conglomerate focused on cables, electricity and energy, while LIG’s core business centers on its defense unit, LIG Nex1.
Through the MOU, the two groups agreed to “create synergy and mutual growth by leveraging each group’s core business capabilities in various sectors,” including advanced materials, defense systems, electricity, energy and communications.
For these goals, the two sides will set up a consultative body to come up with detailed cooperation plans.
Logo of Hoban Group / Captured from Hoban Group website
The MOU is widely interpreted to be aimed at forming an alliance in the face of Hoban Group’s aggressive stake-building efforts in LS’ holding firm, LS Corp.
LS and Hoban are locking horns over a legal battle between LS Group’s flagship unit, LS Cable & System (LS C&S), and Hoban’s cable unit, Taihan Cable & Solution.
In 2019, LS C&S, the leading cable manufacturer in Korea, filed a complaint against runner-up Taihan Cable & Solution, alleging that the latter infringed the former’s patent. Earlier this month, the Intellectual Property High Court upheld a 2022 lower court ruling in favor of LS C&S, and Taihan is seeking to appeal the decision.
It was then revealed that Hoban purchased a less than 3 percent stake in LS Corp., which is the largest stakeholder of LS C&S. Hoban said the purchase is an “investment on the growth potential of the power industry," based on the group’s experience of running Taihan.
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However, industry officials suspect that Hoban may be attempting to exert hostile influence over LS Group’s operations, with LS Corp. CEO and Vice Chairman Myung Roe-hyun saying, “We are closely monitoring the situation because we have no idea why [Hoban] is doing this,” during the company’s shareholder meeting last week.
Korea’s Commercial Act allows a shareholder with a 3 percent or higher stake in a company to request an extraordinary shareholders’ meeting, make shareholder proposals, demand the dismissal of directors and auditors and inspect financial records.
“Hoban said the recent stake-building is purely aimed at financial investments, but there are cautious views that Hoban is seeking to influence LS Group’s operations,” Meritz Securities analyst Jang Jae-hyeok said.
LS Corp.’s largest stakeholder is the Koo family, with over 40 members. LS Group Chairman Koo Ja-eun holds 3.63 percent, Board Chairman Koo Ja-yeol holds 1.87 percent, and each family member holds a less than 4 percent stake — a total stake of 32.12 percent in the company as of the end of last year.
This means the shares are widely dispersed among many individuals, and the company’s control could be challenged in case of conflicts or other hostile movements.
“Depending on the involvement of other shareholders, this could potentially pose a risk to the stability of LS’ governance structure,” Jang said.
LS Cable & System's (C&S) factory in Donghae, Gangwon Province / Courtesy of LS C&S
Hoban is also making aggressive moves against Hanjin KAL, the parent company of Korean Air. Following the owner family with 20.13 percent, Hoban is the second-largest stakeholder in Hanjin KAL.
During Hanjin KAL’s shareholder meeting last week, Hoban opposed a proposal to raise the salary of Hanjin KAL board members. The proposal was approved after voting.