With Cho Hyun-ah, heiress of Hanjin Group -- which owns South Korea’s flagship carrier Korean Air -- teaming up with the largest and third-largest stakeholders prior to the shareholders meeting in March to take over control, her brother and current Chairman Cho Won-tae is preparing more arrows in his quiver, according to industry watchers.

The sibling feud has escalated ahead of the upcoming shareholders meeting, with each side maximizing tools to woo the rest of the shareholders as their secured stakes are more or less the same. 

On Friday, Hyun-ah, the eldest daughter of late Hanjin Group Chairman Cho Yang-ho, released a statement saying she is collaborating with local activist fund Korea Corporate Governance Improvement and midsized builder Bando Engineering & Construction. 

This has led to shares of Hanjin KAL, a holding company of Hanjin Group, trading higher compared to last week, at 41,500 won as of Monday afternoon, up 1.22 percent. Korean Air stocks were traded at 24,050 won, up 1.69 percent. 

Along with KCGI and Bando E&C, which own 17.29 percent and 8.28 stake, respectively, in Hanjin Group’s holding company Hanjin, Hyun-ah with 6.49 stake has secured support of a total of 32.06 percent shareholders. 

The allies said in a statement via a law firm that Hanjin Group is “at risk” and badly needs to invite a professional manager to improve its management, financial status and shareholder value.

Hyun-ah -- the infamous “nut rage” heiress -- has been recently consolidating her clout, after stepping down as head of KAL Hotel Network in 2018 when her younger sister Cho Hyun-min was accused of throwing water in the face of an ad agency manager, rekindling her own power abuse controversy.

While Hyun-min returned as Hanjin KAL’s senior vice president and chief marketing officer, Hyun-ah was excluded in the latest executive reshuffle in November. 

In December, Hyun-ah publicly accused her brother Won-tae of managing the group differently from “the late chairman’s instructions for harmonious, joint management,” saying that he was appointed to the top post without sufficient discussions among family members. 

To gird himself from the opposition, Won-tae, who holds 6.52 percent stake, is expected to try to gain the trust of other family members, his mother Lee Myung-hee and Hyun-min, who hold 5.31 percent and 6.47 percent stake, respectively. 

Family members and executives in control of affiliated companies who hold 4.15 percent stake and Delta Air Lines -- the second-biggest shareholder with 10 percent stake -- are regarded as a “friendly” shareholders to Won-tae. Kakao, which recently acquired a 1 percent stake for 20 billion won in December, is expected to give support to him, as well. 

This gives him only a very narrow 1.39 percent stake advantage. 

Industry experts say now each side will focus to present detailed management plans to grab the rest 30.38 percent stake owned by individual and foreign investors. The National Pension Service, Korea’s state pension fund, which holds 4.11 percent, is likely to vote based on the individual investors’ opinion.

“When excluding shares held by Kakao, which declared it has no intention to participate in management, the gap between the shares held by (the siblings) are a merely 0.38 percentage points. The detrimental factor would be how the shares by foreign investors and minority shareholders vote,” said analyst Yang Ji-hwan at Daeshin Securities. 

The calls to bring in a professional CEO, in order to silence owner risk by the controversy-prone owner family, will continue to be more persuasive for not only institutional investors but also minority shareholders, the analyst added. 

KCGI has been demanding the group to invite a professional manager to head the group and even called on a Seoul court to designate an auditor to review the process through which Hanjin KAL’s board appointed the late chairman’s only son as new chairman in April.

Market insiders are of the view that Won-tae is expected to map out innovative leadership changes prior to the shareholders meeting to prove his mettle as a better leader. 

Cho recently accompanied the chartered flight to Wuhan to evacuate Koreans, which he described as a way to “show his support” for his employees who volunteered for the flight.

But this drew public criticism, with some even accusing him of a publicity stunt prior to the company’s shareholders meeting.

The March meeting is important for Won-tae, as shareholders will vote on whether to reappoint him as executive director of Hanjin KAL.

For him to remain in his present role at Korean Air after his tenure expires March 23, he needs at least 38 percent of all votes based on the 77.18 percent attendance rate at the previous shareholders meeting. 

By Kim Da-sol (ddd@heraldcorp.com)