Investors Press KT&G on Ginseng Spinoff

A group of activist funds has filed an injunction at the Deajeon District Court in South Korea demanding that KT&G address their demand to spin off its lucrative ginseng business, appoint certain outside directors and strengthen its shareholder return policy, reports The Korea Times.

Led by the Singaporean activist private equity fund Flashlight Capital, the group has repeatedly demanded that the ginseng business be spun off for to recover corporate value and share prices.

However, during an investor relations event last month, KT&G rebuffed the request. “The spinoff will have little to no benefit to the company’s corporate value and shareholders from a long-term perspective,” said KT&G Senior Executive Vice President Bang Kyung-man.

Bang expressed concern that KT&G would potentially lose “synergy” in the event of the ginseng unit’s separation.

During the meeting, KT&G also dismissed the funds’ demand to strengthen KT&G’s shareholder return policy. The cigarette and ginseng product manufacturer said the current policy “should hold for now.”

Flashlight Capital founder Lee Sang-hyun believes KT&G’s share price will bounce back to over KRW140,000, a level last seen in 2016, once the firm reorients its investment portfolio to better achieve environmental, social and governance goals.

KT&G’s share price hit a low of KRW87,100 on Feb. 17 but has recovered since.