April 24, 2024

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Hanjin Group’s move to accept some proposals of activist shareholders appears to be lifting market confidence.

It has announced a series of measures to improve its business and management -- a move analysts predict will regain investor confidence in the troubled group.

“Hanjin’s move appears to be in response to proposals by KCGI and the management committee of the National Pension Service,” Yang Ji-hwan, an analyst at Daeshin Securities, said on Feb. 14.

“The group is trying to enhance corporate value by raising shareholder value, streamlining its business and improving financial structure so that it could secure support at the upcoming shareholders meeting in March.”

It seeks to improve business efficiency by focusing on air passenger services, logistics and hotel/leisure businesses and accomplish annual sales of 22 trillion won (US$19.90 billion) with an operating profit of 2.2 trillion won by 2023. The company logged 16.5 trillion won in annual sales in 2018. 

Hanjin also said it will establish internal audit committees under Hanjin KAL, the holding firm of Korean Air and Hanjin Transportation, to improve transparency in its business management and will add four outside directors to its board, out of seven, and accept scrutiny from auditors.

Hanjin Group's headquarters in Seoul

The conglomerate’s announcement came as activist shareholder KCGI, which became the second-largest stakeholder of Hanjin KAL in November, increased pressure on the conglomerate to improve corporate governance and the state pension fund also decided to actively exercise its shareholder rights.

Korea Investment and Securities said the group’s move is likely to boost investor sentiments.

“Considering the group-wide growth strategy and promise to improve corporate governance, investor sentiments toward Hanjin and its affiliates are expected to improve,” said Choi Go-un, a researcher at Korea Investment and Securities.

“Hanjin’s affiliates are undervalued compared to their competitors mainly because of their weak financial structure and group-wide issues, so there are high expectations on the group’s plans,” Choi said. “Further efforts to improve shareholder value are predicted.”

Family-owned Hanjin Group has been embroiled in several scandals recently.

Korean Air Chairman Cho Yang-ho has been charged with dodging inheritance tax and embezzling company funds. His wife has been accused of multiple assaults on employees and illegally hiring foreign housekeepers.

His youngest daughter Cho Hyun-min gained notoriety last year due to her mistreatment of employees, which led to a series of government and prosecutorial probes into Hanjin Group and its businesses. Her older sister Cho Hyun-ah made headlines globally back in 2014 for the so-called “nut rage” incident.


By Park Ga-young (gypark@heraldcorp.com)