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Activist fund KCGI takes aim at Daelim Group

Sept 30,2019
A local activist fund that targeted the corporate governance structure of the beleaguered Hanjin Group is now taking aim at Daelim Group, a conglomerate holding construction, petrochemical, shipping and IT service businesses.

Korea Corporate Governance Improvement (KCGI), a homegrown activist private equity firm, has entered into an agreement with UniKorea Foundation to acquire a 32.6 percent stake in Daelim Corporation, a holdings unit of Daelim Group, according to local media reports on Friday.

Once the sales agreement with the nonprofit organization is completed, the fund led by an investor named Kang Sung-boo will become the second-largest shareholder of Daelim Corporation.

The top shareholder is currently Lee Hae-wook, chairman of construction and petrochemical affiliate Daelim Industrial, along with affiliated individuals, with 62.3 percent.

The UniKorea Foundation had been on the lookout for a buyer of the substantial stake since the entity dedicated to the unification of two Koreas found it hard to pay off a gift tax linked with the stake that it received as a donation from Daelim’s honorary chairman Lee Joon-yong back in 2015.

The KCGI hasn’t made its intention of the acquisition public, though the calls will likely be made in relation to the appointment or dismissal of executives, dividend ratios and any change in the articles of incorporation.

Another potential scenario is a push for a merger between Daelim Corporation and Daelim Industrial because the move could help KCGI widen control over Daelim Industrial, a key affiliate of the group. The holding company has a 21.67 percent share in Daelim Industrial.

In the financial community, observers warned that the conglomerate could fall into possible activism targets due to relatively weak ownership, a high portion of foreign stakeholders and alleged misconduct by Chairman Lee Hae-wook.

A consortium of KCGI and BankerStreet, a private equity group, is bidding for the 31-percent stake in Asiana Airlines being sold by Kumho Industrial, and the primary bidder is expected to be selected in November.

KCGI also stands as the second-largest stakeholder of Hanjin KAL, a holding unit of Hanjin Group and Korean Air Lines, with a 15.98 percent stake.

With the ownership, the fund has released a series of proposals aimed at improving Hanjin Group’s corporate governance system, including the off-loading of loss-making businesses and increasing the dividend ratio.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]