Hankook Tire mired in sibling feud again

Cho Hyun-sik, left, adviser to Hankook & Company, and his younger brother Cho Hyun-bum, the company chairman / Courtesy of Hankook Tire & Technology

Hankook Tire is mired in yet another sibling feud, after the eldest son of the firm’s honorary chairman made moves to retake management control by partnering with a local private equity firm.

Cho Hyun-sik, adviser to Hankook & Company, and MBK Partners have made a tender offer for the firm’s stake of a maximum of 27.32 percent, valued at 518.7 billion won ($395.26 million).

The move is seen as part of his renewed power struggle against his younger brother, Cho Hyun-bum, chairman at Hankook & Company. If the older brother succeeds in acquiring the shares, his stake in the firm will soar to 46.25 percent, elevating him to the status of its controlling shareholder. This would surpass the 42.03 percent stake held by his younger brother.

The public tender lasts until Dec. 24 and Ventura, an investment firm established by MBK Partners, will purchase each share at 20,000 won from the firm’s foreign, institutional and minority shareholders.

The decision rekindles the firm’s long-running sibling feud. In December 2021, the younger son of Cho Yang-rae, honorary chairman of the company, was promoted to chairman, taking control of the firm’s management. Cho Hyun-sik, then-vice chairman at the firm, has since lost his management rights after losing the position and becoming the adviser.

The latest move by the older brother and MBK Partners came about a week after the firm’s incumbent chairman was released on bail after being arrested on allegations of embezzlement. He is suspected of unfairly supporting its affiliate by using corporate capital.

Hankook Tire & Technology headquarters in Pangyo, Gyeonggi Province / Courtesy of Hankook Tire & Technology

The older brother argued that the arrest of the top management has seriously tainted its corporate value. He called for the urgent need to recover its tarnished brand image by hiring management specialists.

It remains unclear whether he will be able to achieve his goal as planned, as the firm’s stock value already topped its tender offer price on the first day of the race. After the announcement, Hankook & Company's share price surged to a daily upper limit of 29.9 percent, Tuesday.

This amounts to 21,850 won per share. Shares of Hankook Tire & Technology also inched up by 1.21 percent on the same day. Hankook & Company is the holding firm of the nation’s largest tire manufacturer.

For now, many argue the incumbent chief holds the advantageous position, as it requires only an 8 percent stake for him to obtain more than half of the firm's shares. But his older brother and MBK have to persuade many more shareholders at what appears to be an unattractive price offer of 20,000 won per share.

"Chairman Cho will have no difficulty in defending his management right with his stake and other stakes in favor of him," a spokesman at the company said. "If necessary, he can acquire more stake, but he does not consider doing so for the time being."

But the spokesman at Hankook & Company declined to remark on other details.