Exclusive: Hoban Group becomes largest shareholder of Hanjin KAL amid merger review

Hoban Group has become the largest shareholder of Hanjin KAL, surpassing the stake held by Hanjin Group Chairman Cho Won-tae and related parties through open-market purchases. The move comes roughly four years after Hoban became the second-largest shareholder by acquiring shares from private equity fund KCGI in 2022.

According to industry sources Monday, Hoban Group recently purchased additional Hanjin KAL shares, securing a stake that slightly exceeds the approximately 20.6 percent held by Chairman Cho and related parties. The gap between the two sides, which had narrowed to 0.42 percentage points as of July, reversed in Hoban's favor after about three months.

Hoban Group filed a business combination report with the Korea Fair Trade Commission last month and is currently undergoing a review. The group is also expected to disclose details of the additional share acquisition through a regulatory filing soon.

Article 11 of the Fair Trade Act requires companies above a certain size to file a business combination report when they acquire 15 percent or more of a listed company's shares, or when they purchase additional shares while already holding at least 15 percent and become the largest shareholder for the first time.

Hoban Group previously filed a business combination report with the Fair Trade Commission and received approval in 2022, when it first raised its Hanjin KAL stake above 15 percent. That review concerned the initial crossing of the 15 percent threshold; the current review was triggered by the additional purchases that made Hoban the largest shareholder.

Share acquisitions by large conglomerates are in principle subject to prior notification, but when shares are acquired through competitive trading on a regular exchange, post-acquisition notification within 30 days is permitted.

The current review will examine whether Hoban's additional stake acquisition has materially changed the control relationship and whether it raises competition concerns. The Fair Trade Commission assesses changes in control by looking not only at shareholding ratios but also at relationships among shareholders, whether executives hold concurrent positions, and business and financial ties between the companies.

The standard review period is 30 days from the date of filing, with a possible extension of up to 90 additional days if necessary. Time spent on supplementary document requests is counted separately, leaving the timing of a final decision uncertain.

Industry observers, however, expect the review to pose little obstacle to Hoban's additional stake acquisition. Because Hoban Group and Hanjin KAL operate in largely different business areas, analysts say competition concerns are limited even where the two overlap in the hotel and resort segment.

Hoban Group began building its Hanjin KAL stake in 2022, when it acquired shares held by private equity fund KCGI and became the second-largest shareholder. The group subsequently sold a portion of its holdings before expanding again in 2023, when Hoban Hotels & Resorts purchased shares previously held by Pan Ocean.

Hoban has continued to add to its position this year. As of end-June, Chairman Cho and related parties held 20.57 percent while Hoban Construction and other Hoban Group affiliates held 19.83 percent. In July, Hoban affiliates bought additional shares on the open market, lifting the group's stake to 20.15 percent and closing in on Cho's side. The latest purchases have now flipped the rankings between the two.

A change in the largest shareholder, however, does not mean management control of Hanjin Group has changed hands. Chairman Cho's side still holds effective control of Hanjin KAL, the holding company with a 26.05 percent stake in Korean Air. Hoban Group has also maintained its stated investment purpose as "passive investment" and has not formally sought board representation or any other form of management participation.

Friendly shareholders backing Chairman Cho's management control are also substantial. Delta Air Lines, which operates a joint venture with Korean Air and holds 14.90 percent, is considered the key ally. Five other companies — including LX Pantos and GS Retail — along with Daeshin and Eugene private equity funds are also regarded as friendly parties. A simple addition of their stakes to those of Chairman Cho and related parties is said to exceed a majority. Japan Airlines, which recently acquired a Hanjin KAL stake, is also cited as a shareholder favorable to Cho's side.