US activist fund to face off with IMM PE over Hanssem

Teton Capital Partners, a US-based activist fund, has taken legal action to block IMM Private Equity from exercising its management rights over Hanssem Co. at a shareholder meeting next month. The move followed its failed attempt to hinder the 1.45 trillion won ($1.2 billion) sale of the top South Korean furniture maker's management rights to a consortium led by the Seoul-based PE firm last month.

Teton Capital is the second-largest shareholder in Hanssem with a 9.23% stake, after a 27.7% stake held by the IMM-led group, which includes South Korean retail giant Lotte Shopping Co. as a strategic investor. The PE firm acquired the controlling interest from Hanssem's founder and honorary Chairman Cho Chang-gul and related parties.

However, the signing of the agreement was delayed until late October to await a local court's decision over Teton's request to block the stake sale process. The court rejected Teton's claim.  

On Tuesday, Teton filed another injunction with a Korean district court, calling on Hanssem to share its shareholder register with minority investors and to appoint a Teton-proposed inspector for the company's extraordinary shareholder meeting set for Dec. 8.

The move is aimed at checking Hanssem top shareholder's arbitrary exercise of management and forming an independent board of directors, according to Teton.

The starting point of Teton's argument against Hanssem and IMM was that the 27.7% stake sale benefited only its honorary Chairman Cho and his related parties, and minority shareholders were excluded from the lucrative deal. The IMM-led group paid around 220,000 won ($185) per Hanssem share, or double its market price at the time.

On the contrary, the remaining shareholders have suffered a 27% plunge in the company's share price since the announcement of the stake sale in September until Monday's close, the US activist fund argued.

That was because of the absence of mandatory bid rules in South Korea, unlike in the US. Under the rules, a company would be required to buy some or all outstanding shares in a company, of which it takes over control, at a price similar to or the same as it pays top shareholders.

FROM SIMPLE INVESTMENT TO MANAGEMENT PARTICIPATION

After its first legal action against Hanssem and IMM was dismissed by the court last month, Teton has increased its stake in the furniture brand to 9.23% from 8.62%, according to its public disclosure on Nov. 16. Along with the stake increase, it has changed the purpose of its investment in the Korean company from simple investment to management participation.

It is now urging Hanssem to introduce an electronic voting system to facilitate contactless voting as well, a move aimed at encouraging individual shareholders to join forces against its new top shareholder, or the IMM-led group.  


At a December shareholder meeting, Hanssem plans to approve non-executive directors chosen by IMM PE and accordingly revise the articles of incorporation.

But Teton is not allowed to put forward a proposal at the December meeting because under domestic regulations a shareholder is required to make a proposal at least six weeks ahead of a shareholder gathering.

With the latest legal steps, Teton seems to be focused on gathering support from individual shareholders before exercising its shareholder rights at the next general meeting.

Write to Jun-ho Cha at chacha@hankyung.com
Yeonhee Kim edited this article.