Flashlight Capital, a Singapore-based activist private equity firm, has reportedly advised Korean cigarette producer KT&G to spin off its ginseng division for a stock listing, as a vital step toward regaining corporate value amidst an increasing global trend toward ESG or environmental, social, and corporate governance, as per analysts.
The fund, which holds roughly a 3% stake in the company, offered recommendations like streamlining non-core companies worth 2 trillion won ($1.4 billion), strengthening the shareholder return policy, and promoting more activist-oriented ESG ideals.
The need to build a medium to long-term strategy to position Lil, an HNB or heat-not-burn cigarette created by the company as a major growth driver was also mentioned.
As per the fund's founder and former head of Carlyle Korea, a worldwide alternative asset manager, Lee Sang-hyun, the new strategy will push the company's recently surging share price from approximately 92,000 won ($64.82) to its prior high of over 140,000 won ($98.63) in 2016.
Market analysts distinguished the recommendation from aggressive takeover attempts spearheaded by American billionaire Carl Icahn in the early 2000s that included a threat of a tender offer and subsequent hostile bids.
After acquiring more than 6% of KT&G, the billionaire, with the aid of hedge fund managers, made 148.2 billion won ($104444.22) in stock gains and demanded the sale of the company's significant assets, the revelation of corporate accounting data, and important details on its ginseng business.
According to the fund, switching to Lil from combustion-based cigarettes will significantly improve the value of health, a crucial ESG factor just as important as the ginseng spin-off.
The listing will help struggling local farmers find new opportunities for growth on the international market, enhancing the sector's social value.
Stock options will also be given to company executives and motivating them to increase their commitment to advancing ESG goals.
KT&G closed at 92,800 won ($65.40), a high of 3.8% from the previous session, continuing its upward trend since July 6, when it reached a low of 80,100 won ($56.45).
Source credit: https://www.koreatimes.co.kr/www/tech/2022/10/419_338627.html