Hanjin KAL roars on renewed control dispute hints with Hoban

Shares of Hanjin KAL Corp., the holding firm of South Korean flag carrier Korean Air Lines Co., extended their rally Wednesday morning after surging by the daily limit high of 30% the previous day on news that Hoban Group has upped its stake in the holding firm to 18.46% from 17.90%.

Hoban Hotel & Resort, a hospitality arm of Hoban Group, announced in a regulatory filing on Tuesday that it had purchased an additional 374,519 shares of Hanjin KAL on the open market between late last December and late April.   

With the latest stake acquisition, the local mid-sized construction-to-leisure conglomerate has narrowed the gap between its holdings in Hanjin KAL and those of the Korean transportation giant’s Chairman Cho Won-tae and affiliated persons to a mere 1.5 percentage points.

Cho and his allies, including friendly shareholders, own a combined 30.54%. Excluding the Korea Development Bank’s 10.58% stake, Hanjin KAL chairman and affiliated persons, however, control 19.96%.

Hoban became the second-largest shareholder of Hanjin KAL in 2022 when its construction arm Hoban Construction Co. took over a 16.44% stake from Korea’s activist fund, Korea Corporate Governance Improvement Fund (KCGI).

At that time, it did not clearly side with either Chairman Cho or another group of shareholders, including his sister Cho Hyun-ah, in a dispute over management control over Hanjin KAL, but was viewed as leaning toward Hyun-ah.

Hoban stated that the latest stake purchase is part of its general investment strategy, but market watchers speculate that the group may wage a proxy war to challenge Chairman Cho's control of the transportation conglomerate. 

Hanjin KAL shares surged 28.4% to 148,900 won on Wednesday morning, while its preferred shares also hit the daily limit of 30% to 38,600 won.

HANJIN AND LS TIE UP

Hanjin KAL’s third-largest shareholder is Delta Air Lines Inc. with a 14.9% stake.

The US airline giant, in a joint venture partnership with Korean Air, remains a strong ally of Chairman Cho, who also doubles as chairman of Korean Air.

However, Cho’s control could be at risk, depending on who ultimately takes over KDB's stake, should the state-run policy bank choose to divest as part of a future portfolio reshuffle. 

While KDB backed the Hanjin chairman during the previous management dispute in 2022, its future alignment remains uncertain.

In what may be a preemptive move, Hanjin KAL is expected to deepen ties with LS Group, a domestic conglomerate specialising in electrics, materials and energy businesses, which has also been at odds with Hoban in recent years. 

Earlier this year, Hanjin and LS signed a memorandum of understanding to enhance collaboration to maximize shareholders' benefits for both groups.

The agreement followed Hoban's acquisition of a roughly 3% stake in LS Corp., the parent of LS Cable & System Inc., on the eve of a legal battle between the cable units of Hoban and LS over patent infringement.

Write to Man-Su Choe at bebop@hankyung.com
Sookyung Seo edited this article.