Korean Air Parent Surges 102% Ahead of Family Feud Showdown

(Bloomberg) -- Global airline and transportation shares are reeling from the disruptions caused by the coronavirus epidemic. Yet one stock has bucked that trend and is now the second-best performer on South Korea’s benchmark index this year.

Hanjin Kal Corp., the holding company that owns shares in Korean Air Lines Co. and Jin Air Co., has soared 102% in 2020. As a result, its market capitalization of $4 billion is double the combined amount of the two carriers.

The outsized gains come ahead of the all but certain feud between the siblings of the founding family at a shareholders meeting later this month. Heather Cho, best known for her “nut rage” incident in 2014, is challenging her brother’s control of Hanjin Group.

“The stock is rising not because of fundamentals but because of bets on which side of the Cho family would win the the tug-of-war of owning more shares ahead of the shareholder meeting,” said Kim Jang-won, an analyst at IBK Securities Co. in Seoul. The date of the meeting has yet to be set.

Since taking over the helm following his father’s death last April, Chairman Walter Cho is facing a rebellion led by his older sister Heather Cho, who’s publicly criticized his leadership and called for a shift to “professional management.” Backing her agenda is Korea Corporate Governance Improvement fund, Hanjin Kal’s largest single shareholder that has been demanding for the conglomerate to focus on its core transportation business.

Heather Cho in January formed an alliance with KCGI and Bando, a South Korean builder, to replace the management of Hanjin Kal during the March meeting. KCGI said in a regulatory filing Monday that it has increased its stake in Hanjin Kal, bringing the alliance’s holdings to more than 37%. It has also recommended board changes and wants a vote on the issue.

Shares of Hanjin Kal gained as much as 19% in early trading Wednesday, extending the previous day’s 20% rally. The stock was the most-bought Kospi issue by foreign investors on Wednesday, Bloomberg data shows.

Walter Cho’s side isn’t sitting still either. Delta Air Lines Inc., which has a joint venture with Korean Air, said last week that it raised its stake in Hanjin Kal. With the backing from his mother, younger sister and other close allies, Walter Cho’s group has about 40% of the holding company.

In an effort to appeal to the minority shareholders, Korean Air and Hanjin Kal announced last month they will sell their non-core assets, including hotels and land, as they try to focus on the main businesses. Hanjin Kal also said it will let its board select the chairman.

--With assistance from Jeffrey Hernandez.

To contact the reporters on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net;Heejin Kim in Seoul at hkim579@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, ;Young-Sam Cho at ycho2@bloomberg.net, Cecile Vannucci

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