CEOs Increase Their Shares

After Sovereign Asset Management took over SK Corporation’s stocks last April, CEOs of other conglomerates are now busy buying up stock to protect their companies. Business leaders are strengthening their influence over corporate groups by shifting shares between affiliates or buying stocks from the market. They are especially interested in raising their shares of the parent company, which acts as the holding company.

CEO Kim Seung-yeon getting a strong grip on Hanwha: Hanwha Group has been working on stabilizing Kim’s managerial influence since last April. Through three transactions, each in April, July and September, Kim increased his personal holdings from 12.86 percent to a vast amount of 22.69 percent by taking over all 9.83 percent of Hanwha Corp.’s stock previously held by Hanwha Stores Co., Ltd.

Hanwha Corp. now has little reason to fear a hostile M&A, for shares held by Kim, treasury stocks owned by Hanwha Corp. itself (13.94 percent), and stocks owned by Hanwha Securities (4.9 percent) total of 44.5 percent. Because Hanwha Corp. acts as the holding company for its group, Kim could tighten his control on the company through such stock dealings.

In August, Hanwha Group also passed over its 12 percent stake in Korea Life Insurance, previously held by Hanwha L&C Corp. and Hanwha Chemical, to Hanwha Corp., and its 3.1 percent stake in Hanwha Land Development to Hanwha Engineering and Construction. Hanwha Corp. owns 100 percent of Hanwha Engineering and Construction’s shares.

By forming a structure where Kim rules Hanwha Corp. and Hanwha Corp. controls Korea Life Insurance, which is the largest of affiliates, Kim could strengthen his hold on Korea Life Insurance. In exchange, Kim gave one million shares of Hanwha Securities to Hanwha Land Development, decreasing his stake from 6.8 percent to 4.4 percent, and raising Hanwha Land Development’s from 4.4 percent to 6.8 percent.

Kolon and Hyundai Motor also tightening its hold: Through five transactions, Chairman Lee Woong-yeul of Kolon Group bought 590,000 shares of Kolon Industries last May, when the nation was in the thick of the SK scandal. Thus, he increased his share from 13.15 percent to 16.75 percent. Honorary Chairman Lee Dong-chan, Lee’s father, also bought 114,720 shares at the same period, raising his portion from 2.75 percent to 3.08 percent.

Kolon Industries is an influential shareholder to several solid affiliates. However, it is always in danger of a hostile M&A takeover for the stocks are not expensive and the rate of shares owned by the largest shareholder is low. Kolon Industries is the parent company of the group, having control over FnC Kolon Corp. (holding 24.7 percent of shares), Kolon Data Communications (35.0 percent), Kolon International Corp. (24.7 percent), Kolon Engineering & Construction (10.1 percent), and Kolon Chemical (21.3 percent) in late June.

“As far as we know, stocks are being acquired personally to establish stable management control, for there have been many people pointing out that the rate of shares owned by the largest shareholder was too low,” explained the Kolon Group.

Meanwhile, in late August, Hyundai Motor Company’s Chairman Chung Mong-koo bought 700,000 of Hyundai Motor shares from the market, increasing his shares from 4.08 percent to 4.4 percent. This was in case its strategic partner, Daimler Chrysler, attained an extra 5 percent share of Hyundai Motor and became the largest shareholder.

Do-Young Kim Na-Yeon Lee nirvana1@donga.com larosa@donga.com