Tag: Flashlight Capital Partners

KT&G Rejects Offer for Ginseng Business

Image: Photobeps
KT&G rejected an offer by Flashlight Capital Services (FCP) to purchase its ginseng business, reports Business Korea.
On Nov. 8, KT&G sent a response to FCP’s letter of intent. “We will do our best to foster the three core businesses, including health functional foods,” it stated.
“Last year, we announced a mid-to-long-term growth strategy to foster health functional foods along with overseas cigarettes and NGP [next-generation products] as our three core businesses, and we will do our best to achieve these goals,” a KT&G official emphasized.
On Oct. 14, KT&G also issued a statement dismissing FCP’s acquisition proposal, stating, “FCP’s acquisition proposal was unilaterally disclosed without any discussion with us.”
In its letter of intent, FCP offered to acquire all KGC’s shares for nearly KRW2 trillion ($1.47 billion), which represents a 50 percent premium over the enterprise value mentioned by some analysts during KT&G’s 2023 investor day.
Industry insiders believe the likelihood of the transaction being completed is low, given KT&G’s shareholding structure.
November 11, 2024
KT&G Remains Committed to Ginseng Business

Photo: KT&G
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.
October 16, 2024
Flashlight Offers to Buy KT&G’s Ginseng Business

Photo: Fan Chen
Flashlight Capital Partners (FCP) wants to purchase KT&G Corp.’s Ginseng business. The activist investor, which is also a shareholder in KT&G, has submitted a letter of intent to acquire all shares of KT&G subsidiary Korea Ginseng Corp. (KGC).
FCP is offering KRW1.9 trillion ($1.4 billion), which is 50 percent higher than the enterprise value analyst estimates mentioned at KT&G’s 2023 investor day.
FCP believes that figure significantly undervalues the business. “It’s like watching parents who downplay their own child,” said FCP Managing Partner Sanghyun Lee in a statement. “We see immense potential in the poor kid. We aim to develop Korea ginseng into a global brand, comparable to Manuka honey or Maotai.”
Despite the growing demand for health food, KGC’s operating profit halved from KRW202.1 billion in 2019 to KRW103.1 billion in 2023, and KT&G’s guidance indicates further decline in 2024.
FCP has argued that the tobacco-ginseng pairing was a “wrong marriage,” and that KGC’s value is not reflected in KT&G’s stock price at all. Since 2022, FCP has advocated for a horizontal spinoff of KGC, but KT&G’s board rejected the proposal in 2023.
Lee compared KT&G’s stance on KGC as “Not good enough for me, but too good for others.” He emphasized the need for either a spinoff or sale of KGC and warned that “If KT&G’s board opposes our proposal without a proper rationale, it will only prove that they are serving the interests of management rather than those of the shareholders.”
Headquartered in Singapore, FCP has repeatedly pushed for changes at KT&G. In recent years, it has pushed for a greater emphasis on smoking alternatives, more transparent procedures in filling the company’s leadership, and a new CEO pay structure.
October 14, 2024
KT&G Investor Wants New CEO Pay Structure

Photo: bong
KT&G shareholder Flashlight Capital Partners has demanded a revision of CEO compensation plan to normalize stock price.
“In the recent past, KT&G’s former CEO was awarded a significant amount of compensation despite a 21 percent drop in KT&G’s stock price, while the KOSPI [The Korea Composite Stock Price Index] surged by 27 percent,” said Flashlight Managing Partner Capital Sanghyun Lee in a statement. “In March 2024, we urged the KT&G board to link the CEO compensation to stock performance, but no action has been taken so far,” Lee added.
Under the plan proposed by Flashlight Capital, the CEO will receive a base annual pay of KRW100 million ($72,199) and be granted shares based on stock price milestones over the next three years. For instance, if the stock price doubles, the CEO will be awarded shares worth KRW10 billion.
“Many of the current KT&G board members are under police investigation for potential bribe charges,” Lee highlighted. “Given that KT&G’s stock price is over a 50 percent discount compared to industry peers, we believe doubling the stock price is highly achievable, provided the board act promptly and decisively.”
Flashlight Capital has proposed an extraordinary general meeting for shareholder approval and requested a response from the KT&G board by the end of July.
July 16, 2024
Investor Welcomes Independent Directors

Photo: KT&G
Flashlight Capital Partners, a significant shareholder of KT&G Corp. welcomed the cigarette manufacturers’ appointment of an independent director, which the investor said would enhance governance and shareholder value.
At its recent annual meeting, KT&G appointed Kyung-Man Bang as its new CEO. Shareholders also approved the appointment of Dong-hwan Shon and Sang-wook Kwak as outside directors
“We view this appointment as a victory for all shareholders, irrespective of size or nationality,” said Sanghyun Lee, managing partner of Flashlight Capital, in a statement. “With the addition of a truly independent director committed to advancing shareholder interests, KT&G has taken a crucial step towards governance normalization.”
In a letter addressed to KT&G’s new board of directors, Lee outlined asked the company to link the compensation of the board and CEO to performance; investigate the underperformance of KT&G’s Lil heat-not-burn product in Japan; and exit the asset management business, among other actions.
“With the appointment of the new board of directors, especially Mr. Shon, we are optimistic that KT&G’s future will be characterized by increased transparency and improved governance standards,” said Lee.
April 3, 2024
KT&G Investor Urges Transparent CEO Search
Baek Bok-in
Flashlight Capital Partners (FCP) is urging KT&G to select its next CEO in a more transparent manner.
In a video published ahead of the South Korean tobacco firm’s annual general meeting in March 2024, FCP highlighted what it considered the problems during previous CEO nominations. It lamented the fact that current CEO Beak Bok-in was the only candidate, for example, and criticized the board’s unusually swift 11-day decisionmaking.
FCP also expressed disappointment in the performance of Baek, who has held the position for three consecutive terms. Over nine years, KT&G stock fell by 19 percent while the KOSPI index rose by 26 percent, according to FCP.
The investor questioned management’s “vain pursuit on volume” at the expense of profit, noting a 40 percent revenue growth coupled with a 17 percent decrease in operating profit. FCP pointed to such “lack of profit motive” as a primary cause for the stock’s over 50 percent discount relative to its peers.
To address the shortcomings, Sanghyun Lee, managing partner of Flashlight Capital, suggested allowing sufficient time for a proper candidate evaluation process; considering outsiders with fast-moving consumer goods expertise; and thoroughly documenting the process for the sake of transparency.
“The 11-day CEO nomination is unprecedented in Korea, standing out even among other former government-owned companies,” said Lee in a statement.
In 2022, KT&G rebuffed a request by FCP to spin of its lucrative ginseng business and appoint certain outside directors.
December 15, 2023