KT&G Remains Committed to Ginseng Business

The Ginseng business remains a key part of KT&G’s plan for growth, the South Korean cigarette manufacturer said after receiving a bid for its Korea Ginseng Corp. (KGC) unit.

On Oct. 13, Singapore-based activist fund Flashlight Capital Partners offered nearly KRW2 trillion ($1.47 billion) for KGC, which is 50 percent higher than the enterprise value analyst estimates mentioned at KT&G’s 2023 investor day.

Flashlight Capital Partners believes that KT&G significantly undervalues its ginseng business and that the ginseng-tobacco pairing does not work.

According to The Korea Herald, KT&G called Flashlight’s bid a “unilateral” offer. “The acquisition offer was unilaterally released without any discussion with the company,” KT&G wrote in a statement on Oct. 14. “We will look into the letter of intent sufficiently.”

In the announcement, however, KT&G also stressed that KGC is a key part of its plan to nurture future growth drivers. It said it will put in all efforts to achieve the goals set under a mid-term business plan released last year.

The plan, announced in January 2023, involves bolstering its investment and sales in three key areas: next-generation nicotine products, overseas businesses and KGC health supplement products.

The activist fund has been pressuring KT&G to spin off its ginseng unit since 2022, citing low performance and undervaluation. KT&G’s board has argued that a spinoff may lead to a loss of synergy for both KT&G and KGC.