Trusstone Asset Management (Trusstone), the second largest shareholder of Taekwang Industrial, noted on the 20th that it would push for the return of former Chairman Lee Ho-jin to normalize management and enhance shareholder value.
On the same day, Trusstone requested Taekwang Industrial to hold an extraordinary shareholders' meeting to appoint former Chairman Lee as a registered executive. Lee Seong-won, head of Trusstone ESG Management, said, “We judged that it is a precondition for normalizing management and resolving the undervaluation of Taekwang Industrial that former Chairman Lee, who is the largest shareholder and exerts substantial influence, formally returns as a registered executive.”
Trusstone criticized Taekwang Industrial for being undervalued, with a price-to-book ratio (PBR) of 0.16 times and an average dividend payout ratio of 1.5% over the past 20 years, which is among the lowest levels for listed companies in Korea. It also mentioned that a cash influx of 900 billion won is expected from the recent sale of SK Broadband shares, but Taekwang Industrial has not concretely disclosed plans to enhance corporate value using this cash.
Trusstone claims that discussions on enhancing corporate value have also ceased following the resignation of Taekwang Industrial’s CEO. The representative noted, “Since last year’s shareholders' meeting, we have discussed various measures, including stock buybacks and retirements, the establishment of a medium-to-long-term dividend policy, and linking executive compensation to shareholder value, with the management and board of directors of Taekwang Industrial,” adding, “We had finalized the legal review for specific shareholder return measures using the proceeds from the sale of SK Broadband shares.”
Trusstone believes that as Taekwang Industrial is facing a crisis with four consecutive years of losses amid poor performance in its core businesses like textiles and chemicals, responsible management by the largest shareholder is needed to establish a new vision and enhance shareholder value. Former Chairman Lee holds about 73% of Taekwang Industrial's substantial equity, including that of related parties.
The representative stated, “I understand that former Chairman Lee is exerting substantial influence over the company’s management while serving as an advisor to Taekwang Industrial, and I believe it would be better for him to participate formally in the board of directors and manage responsibly and transparently rather than avoiding responsibility while exercising influence.”
Taekwang Industrial stated that it cannot unilaterally convene a shareholders' meeting to appoint former Chairman Lee as an inside director without considering his will and health condition. Former Chairman Lee reportedly prepared for his return to management after being reinstated in August 2023 but received medical advice indicating that it would be difficult for him to serve as a full-time executive due to health reasons.
A representative from Taekwang Industrial stated, “Former Chairman Lee has been serving in an advisory role since October last year as a non-executive advisor to ensure growth momentum and engage in new business ventures, providing guidance where the judgment of the major shareholder is needed,” and added, “We are not at a stage to specifically set a timeline for former Chairman Lee's return to management, but we will review it considering improvements in his health situation.”