MBK Partners Ups Bid for Controlling Stake in Hankook

MBK Partners, Asia’s largest private equity firm, has escalated its bid to acquire a controlling stake in Hankook & Company, the parent entity of Hankook Tire & Technology Ltd., Korea's leading tire manufacturer. This development, marked by a heightened offer on 17 December, is set against a backdrop of a family feud within Hankook & Company.

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Published on
December 22, 2023

The Raised Bid

MBK Partners has raised its offer to buy a minimum of 20.35% and a maximum of 27.32% of Hankook & Company by 20%, bringing the offer to 24,000 won ($18.40) per share, a significant jump from the initial 20,000 won offer. This revised price is notably 51.4% higher than Hankook & Company's closing price on the preceding Friday​​​​​​.

The Context of the Bid

This move comes amidst a heated battle for control within the founding family of Hankook & Company. MBK Partners aligns itself with Cho Hyun-sik, the eldest son and adviser to Hankook & Company, and his sister Cho Hee-won. They are challenging the current chairman and their younger brother, Cho Hyum-bum. The escalation in MBK's bid followed the intervention of Cho Yang-rai, the honorary chairman and family patriarch, who sided with his younger son, Cho Hyum-bum​​​​.

Strategic Implications and Market Reaction

MBK's increased offer is a response to Cho Yang-rai's acquisition of additional shares to strengthen his youngest son's position in the company. This move by the patriarch caused a 25% plunge in Hankook & Company’s share price. MBK also requested an investigation into the honorary chairman’s share purchases, alleging price manipulation​​​​​​.

If successful, MBK’s tender offer would significantly increase the stake of the older Cho and his allies in the company. MBK, emphasizing the unrealized corporate value of Hankook & Company under current governance, views this acquisition as a step towards harnessing the company's strong fundamentals and high potential, especially in the burgeoning electric vehicle market​​​​​​.

Broader Implications

This hostile merger attempt is relatively unusual for MBK, and it has generated skepticism among industry observers. From MBK's perspective, the limitations in Hankook & Company's business expansion due to legal risks associated with its current chairman, who faces charges of bribery and embezzlement, play a key role in their aggressive bid. However, there are speculations about MBK's broader intentions, with suggestions that this bid could signal an interest in acquiring stakes in even larger family-owned conglomerates​​​​​​.

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