Cho Hyun-bum, chairman of Hankook & Company, was sentenced to three years in prison and taken into custody on the 29th, leading to predictions that a management dispute among brothers may resurface, causing Hankook & Company’s stock price to soar. However, predictions also suggest that a reemergence of the conflict may be difficult since Chairman Cho holds a 42.03% equity in Hankook & Company and his father, Honorary Chairman Cho Yang-rae, along with the related company Hyosung Group, is acting as a white knight.
On that day, Hankook & Company’s stock price closed at 19,890 won, up 18.68% from the previous day. The stock price began to rise sharply around 3:10 p.m., shortly after news of Chairman Cho’s arrest was reported. Analysts noted that the market is paying attention to the possibility of a renewed management dispute.
The management dispute at Hankook & Company began in June 2020. At that time, Honorary Chairman Cho sold his entire equity stake (23.59%) in Hankook & Company to his second son, Chairman Cho, in a block trade outside of regular trading hours. In 2022, he also gifted 5.67% of the equity in Hankook Tire & Technology to Chairman Cho.
In response, Cho Hyun-sik, advisor of Hankook & Company, and Cho Hee-kyung, chairperson of the Hankook Tire Sharing Foundation, filed for adult guardianship over Honorary Chairman Cho. Adult guardianship is a system to assist adults who have difficulty making decisions by appointing a guardian. Although it was claimed that decisions were made while Honorary Chairman Cho’s mental state was inadequate, the request was dismissed. Advisor Cho launched a counterattack at the 2021 Hankook & Company shareholders' meeting, but the dispute was settled when Chairman Cho was officially appointed as CEO of Hankook & Company at the end of 2021.
Subsequently, in March 2023, Chairman Cho was arrested and indicted on charges of embezzlement and breach of trust, leading to a second dispute. Advisor Cho, noticing the legal risks surrounding Chairman Cho, collaborated with MBK Partners, the largest private equity fund in Korea, to initiate a public buyout of 20.35% to 27.32% of Hankook & Company’s equity. Advisor Cho holds 18.93% of Hankook & Company’s equity and planned to secure a majority stake alongside Cho Hee-won, the second daughter of Honorary Chairman Cho, who owns 10.61% of the equity.
The equity showdown tilted in favor of Chairman Cho as Honorary Chairman Cho acted as a white knight. Honorary Chairman Cho acquired 2,583,718 shares of Hankook & Company through market purchases, securing a 4.41% equity stake within ten days. Hyosung Advanced Materials also acquired 0.75% equity, raising Chairman Cho’s friendly equity stake to a total of 47.19%.
Additionally, the Supreme Court dismissed the adult guardianship case filed by Chairperson Cho last July, indicating that the management controversy appears to have settled for the time being.