Yang-Rae Cho intervenes in ‘Brothers’ Rebellion’… ‘If MBK raises the acquisition price, I will be directly involved.’

Yang-Rae Cho Korea & Company (000240)(formerly Hankook Tire Group) Honorary Chairman announced his intention to intervene in the management dispute between his eldest son, Advisor Cho Hyun-sik, and his second son, Chairman Cho Hyun-beom.

On the 12th, a high-ranking official at Hankook & Company said, “Honorary Chairman Cho expressed his intention to become directly involved if MBK Partners, allied with Advisor Cho, raises the tender offer acquisition price.”

To date, the prevailing analysis is that Chairman Cho has taken an advantageous position, as Korea & Company’s stock price has exceeded the tender offer acquisition price (20,000 won) of MBK Partners, which was affiliated with Advisor Cho. On this day, Korea & Company’s closing price was 21,000 won. However, it is understood that Honorary Chairman Cho decided to participate in the war as speculation emerged that MBK may seek a last-minute reversal, such as raising the acquisition price.

Honorary Chairman Cho is classified as a friend of Chairman Cho. Advisor Cho and his children, including his eldest daughter Cho Hee-kyung, chairman of the Hankook Tire Sharing Foundation, had a falling out during the adult guardianship trial. When Chairman Cho applied for adult guardianship for himself in 2020, he issued a statement saying, “I believe that Chairman Cho Hyun-beom (then president) contributed greatly to the growth of the company,” and “I had already targeted him as the largest shareholder.” .

It also has ample financial power. In 2020, he transferred all of his shares (23.59%) in Korea & Company to Chairman Cho through an after-hours block deal. Last year Hankook Tire & Technology (161390)(Hankook Tire) also donated its entire 5.67% stake to Chairman Cho. By inheriting the shares, he acquired a huge amount of funds. The sale proceeds of the two companies alone exceed 540 billion won (Hankook & Company 300 billion won, Hankook Tire 242.5 billion won). It is known that at the time of management, a significant amount of funds were secured through dividends from affiliates. This far exceeds the funds (KRW 518.6 billion) that MBK will invest when securing the largest stake (27.32%) in this tender offer.

Chairman Cho’s stake in Korea & Company is 42.03%, and if he secures an additional 7-8% of friendly shares, he can reliably defend against a tender offer by Cho and MBK. If Honorary Chairman Cho uses his abundant funds to purchase shares of Korea & Company, it is possible to block the attack even if Advisor Cho’s side raises the tender offer price at the last minute and increases the level of the offensive.