The Wall Street Journal ran a piece this weekend on Carl Icahn's latest shareholder activism (read: hostile takeover) efforts at KT&G, the Korean tobacco concern. Icahn is pressing for control of the firm which means, of course, that he believes he can extract significant value through superior management (or be annoying enough to be bought out at a premium). He just won a board seat for an ally of his. A nice victory (but just a single step forward) given his recent back-down from Time Warner.
KT&G's history is an interesting one. State owned and a monopoly until 2002 when privatization (read: taking money from foreign institutions) took them public. They have benefited greatly from foreign capital and for the longest time haven't carried any debt at all. I will leave it to the students of finance to comment on the wisdom of that particular fiscal strategy.
As is becoming typical of such endeavors, Icahn has an ally in other activist firms overflowing with cash. In this case, Warren Lichtenstein, who leads the hedge fund "Steel Partners II, LP." There is a side of me that wonders if Icahn, when he sits down with the likes of Lichtenstein and plots a takeover, isn't revealing material non-public information in the process. Certainly, that Icahn is plotting a takeover would be material, no? Why should Lichtenstein benefit before the rest of the market? Ah, well.
Korea is particularly closed as a capital market jurisdiction. It is also very isolationist. That is changing, clearly, given that the activism at KT&G is the first foreign led hostile "takeover" (I use quotes because so far they haven't committed totally to a pure takeover) in the country ever.
I found it comic that the unions picketed Icahn and that the move is spawning a great deal of hatred for foreign capital under the thin guise of nationalistic pride. Take heed, foreign firms: You cannot have your cake and eat it too. If you take foreign capital, enjoy the advantages thereof and then try to lock out foreign shareholders (KT&G earnings releases are in two versions, Korean and English. Guess which is the more extensive.) then don't expect them to roll over and play dead.