M&A Speculation Rekindled at KT&G
By Na Jeong-ju
Staff Reporter
A feud over how to run KT&G, the country's largest tobacco maker, has been re-ignited between the tobacco maker and its shareholder Steel Partners II LP.
KT&G officials said Sunday, Warren Lichtenstein, head of Steel Partners and one of the tobacco firm's outside directors, sent an email to KT&G CEO Kwang Young-kyoon last week to protest the firm's purchase of Shinhan Financial Group shares.
On Wednesday, KT&G bought 3.5 million shares in Shinhan for 197 billion won. In return, Shinhan is expected to buy KT&G shares.
Analysts in Seoul said the deal shows KT&G and Shinhan have become a white knight for each other to defend them from hostile take-over bids. Steel Partners and Carl Ichan, a U.S. investor, made an unsolicited offer to buy KT&G last year, which was rejected by the company.
``In the letter to Kwak, Lichtenstein denounced the firm's decision to buy Shinhan shares, and said the investment is unrelated to the company's core businesses,'' a KT&G official said. ``He also demanded Kwak step down or sell the company if he is unable to raise the value of the company. As an outside director, he has the right to make such demands, but it is not a usual case in ordinary firms.''
Since last year, KT&G has taken a series of measures to improve corporate governance. Early this year, it requested Kookmin Bank, Woori Financial Group, Shinhan, Nonghyop Bank and other lenders to buy its shares in an apparent bid to boost friendly shares.
KT&G said the investment in Shinhan is not aimed at defending managerial control, but a ``mere portfolio investment.'' Shinhan officials said the group will buy KT&G shares, if it is needed.
``We think KT&G deserves attention from investors as it has maintained solid earnings growth,'' a Shinhan official said. ``However, we have no immediate plan to invest in KT&G.''
The takeover threat by Lichtenstein and Carl Ichan has boosted KT&G`s share prices of late. In line with the requests from its shareholders, the firm has taken more shareholder-friendly actions such as increasing dividends and buying back its won shares.