This article was published on Jan. 21, 2025, at 11:07 a.m. on the ChosunBiz MoneyMove site.
A dispute over management control of T'way Air has officially begun between the largest and second-largest shareholders. On the 21st, the second-largest shareholder Daemyung Sono Group sent a demand for management improvement to the current management (☞[Exclusive] T'way Air management dispute begins… Daemyung Sono sends management improvement request). Until now, Sono had been cautious about the possibility of a management dispute, but it has ultimately decided to take concrete action.
Daemyung Sono Group is expected to contest votes against the largest shareholder (YeaRimDang, Tway Holdings) at the regular shareholders' meeting in March. Follow-up actions such as requests to inspect the shareholder register and proposals to appoint directors are also anticipated. Both sides, who have an equity gap of only 3 percentage points, are expected to compete for securing seats on the board during this shareholders' meeting, where the direction of management control will depend significantly on the choices of minor shareholders holding over 40% of the total equity.
According to the investment banking (IB) industry on the 21st, Sono is reportedly planning to request an inspection of the shareholder register and make shareholder proposals for appointing directors to the management of T'way Air as early as that day. Following the previous day's delivery of a certified mail requesting the resignation of the current management, including Na Seong-hoon, the representative of YeaRimDang and vice chairman of T'way Air, along with a capital increase through paid-in capital increase, Sono is now preparing for the regular shareholders' meeting.
There have been speculations in some circles of the industry that Sono might pursue a public purchase, but the shareholders eligible to vote at this regular meeting have already been finalized as of Dec. 31 of last year. Therefore, making a public purchase at this point would not be effective for the upcoming shareholders' meeting.
The key issue at this regular shareholders' meeting will be how many directors Sono can appoint. T'way Air has a set number of directors. Unlike Korea Zinc, which has no upper limit on the number of directors, it is not possible to dominate the board by simultaneously presenting around 10 candidates. Until the end of 2023, T'way Air had a board consisting of five internal directors and four external directors, totaling nine, but is now operating with only seven. That means there are already two vacant positions excluding directors whose terms are expiring.
Currently, the internal directors of T'way Air are Jeong Hong-geun, CEO, Na Seong-hoon, vice chairman, Kim Hyung-yi, head of the management department, and Jeong Chang-hee, head of the finance department, making a total of four. External directors consist of Choi Seung-hwan, former deputy representative of Samjong KPMG, attorney Kim Sung-hoon, and Choi Sung-yong, representative of The Snowball, totaling three.
Among these, the internal directors whose terms expire in March this year include CEO Jeong Hong-geun, and internal directors Kim Hyung-yi, along with external directors Kim Sung-hoon and Choi Sung-yong. Considering the two vacant positions, Sono is in a position to potentially propose as many as six director candidates.
T'way Air is reported to not allow cumulative voting in its articles of incorporation. Cumulative voting is a voting method that grants as many votes as the number of directors one wants to appoint for each share. If there are multiple director candidates, shareholders can concentrate or distribute their given voting rights to one or several candidates. Currently, most listed companies in South Korea exclude cumulative voting.
Thus, T'way Air must elect directors through straightforward voting, meaning that the largest and second-largest shareholders will intensely compete to secure a majority of voting rights. The combined equity of the largest shareholders, Tway Holdings and YeaRimDang, is around 30.06%. Daemyung Sono's equity stands at 26.77%.
T'way Air has a high equity ratio among minor shareholders, and the direction of management control is expected to be determined based on where these shareholders cast their votes. Currently, the shareholding ratio of minority shareholders, who do not belong to either the largest or second-largest shareholders, is approximately 43.17%.
Meanwhile, Sono has demanded the resignation of the current management, including vice chairman Na Seong-hoon, and a paid-in capital increase allocated to shareholders. Sono believes that there is a need for capital expansion for maintenance and that there are issues with aviation safety due to a surge in incidents and failures every year at T'way Air.
Sono is reported to have conveyed its stance of participating in the paid-in capital increase without raising funds externally as the second-largest shareholder. It is evaluated to have sufficient capital.