• February 21, 2024

Activist Investor Urges Overhaul at KT&G

 Activist Investor Urges Overhaul at KT&G
Photo: KT&G

A Singapore-based activist investment firm is calling on KT&G to spin off its ginseng business and focus on smoking alternatives, reports The Wall Street Journal.

Singapore-based Flashlight Capital Partners has acquired a stake of about 1 percent in the South Korean tobacco conglomerate and is pushing for heat-not-burn products to account for at least half of KT&G’s total tobacco revenue by 2027.

The investment firm also wants KT&G to separate its ginseng business from its core tobacco business to unlock the former’s value and expand it globally. “From our perspective, it defies logic that a ginseng business is owned by a tobacco company,” Flashlight Capital wrote in a letter to KT&G shareholders.

The investment firm is pushing for KT&G to divest noncore businesses, such as its real estate development arm, the letter said. It wants the company to triple the size of its share buyback program and improve on environmental, social and corporate governance matters.

Despite recent gains, the company’s share price is close to where it was 15 years ago, according to Flashlight Capital, which also notes that KT&G trades at a discount to its peers and the broader market.

Previously known as Korea Tobacco and Ginseng, KT&G is one of South Korea’s largest tobacco sellers, with a market capitalization equivalent to about $8.5 billion, according to FactSet.

The company was established in 1883 as a state-run tobacco manufacturer and privatized in 2002. KT&G is now an international company with the equivalent of $3.6 billion in sales.

A KT&G spokesman said the company has been closely communicating with shareholders and that it values their relevant comments. “We will continue to work on maximizing shareholder value by implementing shareholder return policies,” the spokesman added.