MBK's Hankook & Company takeover bid fails
Hankook & Company Chairman Cho Hyun-bum, right, and firm adviser Cho Hyun-shick / Korea Times file
The months-long dispute among the owner family of Hankook & Company ended in a victory for current Chairman Cho Hyun-bum, the second son of Honorary Chairman Cho Yang-rae, according to market watchers, Tuesday.
Concluding the family conflict was a failed tender offer of local private equity firm MBK Partners backed by firm adviser Cho Hyun-shick, the chairman’s older brother, and Cho Hee-won, their sister.
The extended fight to gain the controlling stake in the holding firm of Hankook Tire will take a legal turn, as indicated by either side seeking a judgment of the financial authorities on illicit share trading suspicions in addition to an appellate case of a guardianship review against the honorary chairman. Cho Hee-kyung, the eldest daughter of the honorary chairman, is seeking to nullify a 2020 block deal whereby their father handed over his entire stake of 23.59 percent to his second son before stepping down as chairman.
Also lingering are legal risks concerning the current chairman pending a verdict in his trial on charges of embezzlement and breach of trust. Cho Hyun-bum was detained and indicted in March for incurring 20 billion won ($15 million) in losses to the firm but has since been released on bail.
Failed bid
MBK Partners said it has concluded the weeks-long tender offer launched to acquire between 20.35 and 27.32 percent of shares in Hankook & Company, frustrated by slightly over 8.38 million shares that sought subscription.
They account for only 8.83 percent of the offered total, less than half of the minimum level anticipated. The final per-share price offered was 24,000 won, up 4,000 won from the initial figure of 20,000 won.
The 20.35 percent stake together with a combined 30.35 percent held by the current chairman’s three siblings would have raised the total to a controlling stake of 50.7 percent.
However, MBK’s plan essentially failed, Dec. 22, when it announced the subscription requests fell short of the “meaningful target" level.
The current chairman was able to fend off his three siblings, thanks in large part to the last-minute purchase of huge stakes by his father and his uncle, Hyosung Honorary Chairman Cho Suk-rae, over the past two weeks.
Hankook & Company released a statement vowing to fortify shareholder values.
“We respect the judgment of shareholders on this matter,” it said. “We will strive to improve shareholder value in the future.”
Also announced was a plan to seek accountability for the recent share price fluctuation turmoil, as guided by financial authorities.
“We will seek an investigation into allegations of illicit share trading ahead of the tender offer announcement, to prevent confusion of this sort in the future.”
The move was in response to MBK filing a complaint with the Financial Supervisory Service on Dec. 15 to investigate Cho Yang-rae on stock manipulation suspicions and failure to report large holdings of shares.
The private equity firm took issue with the honorary chairman buying 56.9 billion won in Hankook & Company shares, only a fraction of the over 500 billion won he had to help the second son.
The guardianship hearing is scheduled to begin next month.
A lower court dismissed the eldest daughter’s motion in April, citing medical treatment records and expert opinions.
However, she appealed, challenging the lack of mental health evaluation to determine whether the father was competent and mentally stable enough to make sound decisions.
If the court finds in favor of the eldest daughter, the block deal will be nullified, toppling the current chair’s reign.
MBK Partners said it decided against the purchase via tender offer.
“We will continue monitoring Hankook & Company’s corporate governance,” it said.