Hoban's growing stake in Hanjin KAL raises profit-taking speculation

As Hoban Group continues to build up its stake in Hanjin KAL, speculation over a management control battle has grown — but analysts in the securities industry say the conglomerate may be aiming for investment gains rather than a takeover. Hoban set a precedent last year by selling its entire LS stake for roughly 100 billion won in capital gains, and Hanjin Group Chairman Cho Won-tae already commands a substantial bloc of friendly shareholders. Should a proxy fight at a shareholder meeting actually materialize, the voting direction of not only Korea Development Bank but also the national pension fund is seen as a key variable.

According to financial investment industry sources, Hoban Group had poured roughly 878.2 billion won into acquiring Hanjin KAL shares as of July 10, generating an estimated unrealized gain of more than 1 trillion won. iM Securities calculated the average purchase price at 59,793 won per share at the time, with a return exceeding 125 percent. Hanjin KAL's share price has since climbed 30.07 percent — from 134,700 won then to 175,200 won on Tuesday — pushing the unrealized gain even higher.

Hoban Group has continued buying Hanjin KAL shares on the open market and, concluding that its stake has surpassed the combined 20.57 percent held by Chairman Cho and his related parties, recently filed a business combination report with the Korea Fair Trade Commission.

Hoban also booked a substantial gain from its LS investment last year. After its acquisition of an LS stake became known in March last year, Hoban built its holding to 4.43 percent, or 1,404,665 shares. The possibility of management intervention was raised at the time because affiliate Taihan Cable & Solution and LS Cable & System were locked in a dispute over patent infringement and technology leakage — but Hoban sold its entire position in October and November of that year.

Hoban is understood to have bought the LS shares in the low 100,000-won range and sold them at between 200,000 and 230,000 won. Based on the number of shares held, a simple calculation puts the capital gain at roughly 100 billion won. The result was an investment return realized through the full disposal of a stake that had once raised the prospect of management intervention.

Securing control of Hanjin KAL is also seen as an uphill task for Hoban, even if it pulls ahead in shareholding, given the size of the friendly bloc behind Chairman Cho. Cho and his related parties hold 20.57 percent, while Delta Air Lines — classified as a friendly shareholder — holds 14.90 percent, Korea Development Bank 10.58 percent, and LX Pantos 3.83 percent. Combined, these stakes amount to 49.88 percent.

Cho has also moved to acquire additional shares. On Monday, Cho signed a contract to purchase 325,000 Hanjin KAL shares at 114,000 won per share, for a total of 37.05 billion won. The transaction is set to be carried out through block trades outside regular trading hours from Dec. 3 through Jan. 1. The identity of the seller has not been disclosed, however, leaving it unclear whether the overall friendly shareholding on Cho's side will increase.

Korea Development Bank's 10.58 percent stake — counted among Cho's friendly shareholders — is seen as a potential swing factor in any future control contest. The bank injected 500 billion won into a Hanjin KAL rights offering in 2020 to support Korean Air's acquisition of Asiana Airlines. With Korean Air and Asiana Airlines set to launch a combined carrier on Dec. 17, the possibility that Korea Development Bank may sell its stake to recoup its investment has also been raised.

Attention is also focused on how the national pension fund will exercise its voting rights. Holding a 5.46 percent stake in Hanjin KAL, the fund voted against the reappointment of Chairman Cho as an inside director at the regular shareholder meeting on March 26, citing his failure to fulfill oversight duties against acts that damaged corporate value and infringed on shareholder rights. It also voted against the agenda item on approving the cap on director compensation, arguing the limit was excessive relative to management performance.

This was not the first time the national pension fund opposed Cho's appointment as a director. It voted against his appointment as an inside director at the Korean Air shareholder meeting in 2021 and again in 2024. In this year's management control dispute at Korea Zinc, however, the fund voted in favor of director candidates put forward by both sides, stopping short of throwing its weight behind either camp. Observers say it is therefore unlikely that the national pension fund will take a clear side in the Hanjin KAL control battle either.

Hoban Group continues to list its purpose for holding the Hanjin KAL stake as "simple investment." A securities industry official said Hoban Construction's share purchases in Hanjin KAL resemble the construction industry practice of acquiring a blocking position in a deal. "Given the friendly shareholding on Chairman Cho's side, an immediate escalation of a management control dispute is unlikely," the official said. "It looks set to be a long game."