Delta gives helping hand to new chairman of scandal-stricken Hanjin Group
SEOUL, AJU - The inexperienced new chairman of South Korea's scandal-stricken Hanjin Group won a powerful backer to fend off a hostile takeover bid after Delta Air Lines, a major American airline headquartered in Atlanta, game a helping hand by purchasing friendly shares in the group's virtual holding company which controls Korean Air.
Delta said in a statement published through News Hub that it has acquired a 4.3 percent equity stake in Hanjin-KAL, which owns 30 percent of Korean Air. The American airline said it intends to increase its equity stake in Korean Air to 10 percent over time, after receiving regulatory approval.
Delta and Korean Air launched a trans-Pacific joint venture in May 2018, providing customers with seamless access to more than 290 destinations in the U.S. and over 80 destinations in Asia. Delta said the joint venture underlined nearly two decades of its close partnership with Korean Air.
“Experience tells us this investment will further strengthen our relationship as we continue to build on the value of the joint venture,” Delta CEO Ed Bastian was quoted as saying. As a close business partner of Hanjin's late patriarch Cho Yang-ho, Bastian gave his trust to new chairman Cho Won-tae at the International Air Transport Association (IATA) in Seoul this month.
Cho Won-Tae, 43, was officially designated as Hanjin Group chairman in May to succeed his father who died on April 8. However, he has a mountain of work to consolidate his leadership as the sudden death of his father led to the group's third-generation transfer of leadership in a state of unpreparedness.
Delta's new investment comes as Korean Air and other Hanjin units are under strong pressure to enhance their corporate governance and transparency in accounting and management.
With support from civic groups, KCGI, the country's first activist private equity fund which holds a 16-percent stake in Hanjin-KAL, has urged the group to improve its image and regain social credibility. The fund wants Korean Air to spin off and list its aerospace research and manufacturing division for long-term growth as a competitive entity.
CGI welcomed Delta's investment and urged the American airline to work for Hanjin's efficient and transparent management. “We understand that the acquisition of stakes was made in a legitimate and transparent manner,” the fund said in a statement.
“We propose Delta Air Lines take on the role of monitoring and checking as fellow shareholders so that Hanjin Group can eliminate inefficiency, which is high compared to global airlines, and strengthen management transparency in line with global standards,” KCGI said.
Cho Yang-ho and his family won 28.93 percent of Hanjin-KAL, but the new chairman has yet to inherit the stake held by his father.
Hanjin has been hit hard by a series of scandals since the new chairman's younger sister, Cho Hyun-min, threw a glass cup and sprayed plum juice during a business meeting with advertising agency officials. The incident fueled public anger, leading to multiple investigations into the chairman, his wife and children on charges of creating a slush fund, evading taxes, bringing in luxury foreign goods illegally, abusing and assaulting company employees and others.