Will Hoban attempt takeover of Korean Air?

Hoban Construction has increased its stake in Hanjin KAL to over 18 percent, narrowing the ownership gap with the largest shareholder bloc led by Hanjin Group Chairman Cho Won-tae to less than 2 percentage points, according to industry officials on Tuesday.

Hanjin KAL is the holding company of Hanjin Group, best known for being the parent company of Korean Air.

While the flagship construction arm of Hoban Group maintained that the acquisition is intended solely for investment purposes, many market watchers view the move as a precursor to a potential management dispute that could reshape the balance of power within Hanjin Group.

On Monday, Hoban Construction reported via the Financial Supervisory Service's electronic disclosure system that its combined stake in Hanjin KAL — including shares held by Hoban Hotel & Resort and other affiliates — had increased from 17.44 percent to 18.46 percent.

"The shares were acquired purely for investment purposes," a Hoban Construction official stated.

Industry attention, however, is focused on whether the builder might enter into a management dispute with Hanjin.

Hoban became Hanjin KAL’s second-largest shareholder in 2022 after acquiring the entire stake previously held by KCGI, the private equity firm that had been embroiled in a battle for control of Hanjin.

Since then, the builder has continued to narrow the gap with the Hanjin chairman by acquiring additional shares from Pan Ocean in 2023.

Cho and his allies currently hold a 30.54 percent stake in Hanjin KAL, according to the report he disclosed last month. Of that, 10.58 percent is owned by the Korea Development Bank (KDB).

Excluding the KDB’s stake, Cho’s effective ownership drops to 19.96 percent — just 1.5 percentage points higher than Hoban’s. This means that if KDB decides to sell its shares, it could potentially jeopardize Cho’s grip on management control.

A possible management dispute already surfaced during the shareholders' meeting of Hanjin KAL in March when Hoban Construction opposed a proposal to increase the ceiling on directors' compensation from 9 billion won ($6.3 million) to 12 billion won.

Hoban's past interest in acquiring Kumho Industrial, the former parent of Asiana Airlines, back in 2015, has also fueled speculation that the builder may seek to enter the aviation industry in the future.

More recently, Hanjin Group signed a memorandum of understanding with LS Group last month, stating that the signing was aimed at boosting collaboration and maximizing shareholder value.

The move, however, has been interpreted as a strategic effort to build alliances, given that both Hanjin and LS groups have been at odds with Hoban.

Hoban Group is in a tense relationship not only with Hanjin but also with LS. Earlier this year, it reportedly acquired about a 3 percent stake in LS Corp., the parent company of LS Cable & System.

Meanwhile, shares of Hanjin KAL hit the upper trading limit, reflecting expectations of a potential management dispute between Hanjin and Hoban.

According to the Korea Exchange, Hanjin KAL's stock price jumped 29.93 percent from the previous day, closing at 115,900 won on Tuesday.