June 22, 2019

Delta buys stake in Korean Air parent

Delta Air Lines has acquired a 4.3% stake in the parent company of Korean Air Lines, with plans to increase that holding to 10% to thwart a local activist fund’s challenge.

Delta’s move dashed investor hopes of a battle to control the family-run group that had driven up shares since the death of patriarch Cho Yang-ho in April.

Korean Air has had a joint venture with Delta since 2018.

Should the second-largest US airline raise its stake to 10% in Hanjin Kal, the carrier’s founding family and allies will hold a total 39% stake, versus the 16% stake held by activist fund Korea Corporate Governance Improvement (KCGI).

Korean Air has been plagued in recent years by a series of scandals involving its founding family members.

In April, Cho suddenly died at age 70, just weeks after shareholders decided to end his 27-year tenure on the airline’s board in a show of growing shareholder activism in Asia’s fourth-biggest economy that has long been dominated by family-owned conglomerates.

The group subsequently appointed his only son Walter Cho, 43, as chairman and chief executive officer (CEO), but the company has yet to inform regulators about a definitive succession plan.

The new CEO and his two sisters have small stakes in Hanjin Kal, in which the late Cho has a 17.8% stake.

Against that backdrop, KCGI raised its stake to nearly 16%, fueling speculation about an impending ownership battle at the conglomerate.

The US airline did not disclose how much it paid for the 4.3% stake, the name of the seller, or the timetable for increasing the stake to 10%.

Atlanta-based Delta has been growing internationally both through joint ventures and direct equity investments.

Delta also owns stakes in Grupo Aeromexico, Air France-KLM, China Eastern, Brazil’s Gol and Virgin Atlantic, and has been negotiating a stake in Alitalia.