NPS to Back Candidates Put Forward by Both Sides at KEMCO Shareholders’ Meeting... ‘Hanwha’s 5.8%’ Emerges as Key Factor [fn Market Watch]

[Financial News] The National Pension Service (NPS) will vote in favor of all candidates put forward by both KEMCO Chairman Choi Yun-beom’s side and the Youngpoong-MBK Partners alliance at KEMCO’s extraordinary shareholders’ meeting. It has chosen a neutral stance rather than backing either side. As a result, attention ahead of the vote on the 9th is shifting to the interpretation of the ‘3% rule’ governing the separate election of audit committee members and to Hanwha Group, which holds effective voting rights approaching 6%.
According to investment banking and industrial sources on the 7th, the NPS Fiduciary Responsibility Specialty Committee held its 11th meeting that day and decided to vote in favor of all three agenda items at KEMCO’s extraordinary shareholders’ meeting. The items are: Item 1, partial amendments to the articles of incorporation to expand the number of separately elected audit committee members; Item 2, the election of four directors through cumulative voting; and Item 3, the election of an independent director who will serve as an audit committee member. All nine members attended the meeting: Chair Lee Yeon-im; full-time members Park Young-seok and Jung Hee-jun; and part-time members Jung Woo-yong, Lee Sang-min, Lee In-hyung, Cho Sung-il, Park Rae-su and Lim Sam-seop.
Under the cumulative voting system, the NPS will divide its voting rights equally among the four candidates—Lee Hyung-kyu, Seo Eun-suk, Lee Jun-bong and Shim Hye-seop—allocating one-fourth to each. Lee Jun-bong and Shim Hye-seop were nominated through shareholder proposals by Youngpoong, YPC and Korea Corporate Investment Holdings. Lee Hyung-kyu was proposed by YOOMI, which is classified as a friendly shareholder of Chairman Choi, while Seo Eun-suk was recommended by KEMCO’s board. For the agenda item on electing an independent director to serve on the audit committee, the NPS will also support both Baek In-kyu, former chairman of the board of Deloitte Korea Group and recommended by the board, and Park Yoo-kyung, former head of emerging-markets investments at APG Asset Management and recommended by MBK Partners and Youngpoong. The NPS holds a 5.48% stake in KEMCO.
Market attention is focused on the detailed interpretation of the 3% rule. Under the Commercial Act, when audit committee members are elected separately, the combined 3% rule applies to the largest shareholder and specially related parties, allowing their holdings to be counted only up to a combined 3%. For other shareholders, the individual 3% rule applies, allowing each shareholder’s holdings to be counted up to 3%. KEMCO’s largest shareholder is currently YPC, an affiliate of Youngpoong, with a 25.21% stake.
The issue is where to draw the boundary for parties whose holdings must be combined. Some legal experts argue that specially related parties should include not only affiliates but also executives of the relevant company. If this interpretation is applied, KEMCO inside director Choi Yun-beom would be classified as a specially related party of the largest shareholder and become subject to the combined 3% rule. This would improve the prospects of Park Yoo-kyung, who had been considered the underdog. Choi’s side, however, is locked in a management-control dispute with Youngpoong and MBK Partners and has separately disclosed its shareholdings. It therefore argues that Choi cannot be considered a specially related party. If that view prevails, Baek In-kyu, whose side can fully utilize its friendly votes, would gain the upper hand.
As the two legal interpretations clash, Hanwha Group has emerged as the practical swing factor. Because it holds its KEMCO stake across three affiliates, the individual 3% rule clearly applies to each entity. Hanwha H2 Energy, which owns 4.76%, can exercise voting rights on up to 3% of the shares, while Hanwha Impact, with 1.79%, and Hanwha Group, with 1.14%, can exercise all of their holdings. Combined, the stake amounts to approximately 5.8%. Among shareholder groups that are not parties to the management-control dispute, it is regarded as the most powerful voting bloc. 


[email protected] Kang Gu-gwi Reporter