SEOUL, March 7 (UPI) -- South Korean companies are nervous about possible hostile takeover bids by foreign investors as the country's tobacco giant is facing threats from billionaire U.S. financier Carl Icahn.
Businesses are calling for the government to take measures to shield local companies from takeover attempts, warning that foreign speculative funds would focus on hostile takeovers against many companies in Asia.
Seoul has ruled out any steps to help local companies protect themselves against hostile takeovers and moved to address the corporate concerns, saying it will consider lending a hand.
Fear among the business community was fueled Tuesday when South Korea's biggest tobacco maker, KT&G Corp., said Carl Icahn and his allies are set to win at least one board seat at the takeover target company.
At a press conference in the capital, KT&G Chief Executive Kwak Young-kyoon said Carl Icahn has won support from 35 percent of shareholders, enough to secure one seat on the company's board.
Icahn and his partners, including Warren Lichtenstein, who heads investment group Steel Partners, currently hold a combined 6.72 percent stake in the tobacco company.
U.S. investment firm Franklin Mutual Advisers, which with 8.3 percent holds the biggest single stake in the firm, is in favor of Icahn's bid.
Kwak said his management has secured support from at least 40 percent of shareholders, noting that the remaining 25 percent are still floating.
KT&G will start to secure favorable investors in South Korea by holding meetings with major shareholders said Kwak, who just returned from a two-week overseas investor relations sessions to gather support from foreign investors.
He acknowledged that foreign investors showed interest in Icahn's proposals to spin off the company's ginseng and real estate businesses and increase dividends, demands rejected by the tobacco company.
Icahn stunned KT&G late last month when he offered to buy the company for $61.21 a share, higher than the current $55.09, in a takeover bid for the South Korean company.
In the face of mounting pressure, the KT&G chief said his company was ready to accept one outside director recommended by U.S. investors on the board at its annual shareholders meeting next week.
KT&G is bracing for a voting showdown over managerial rights with Icahn and his allies at the company's March 17 general shareholders' meeting, which will select six new board members, including two outside directors.
"We will not push too hard to block the election of Icahn's candidates at the expense of our shareholders' interest," Kwak said. "While meeting foreign investors, I felt it was unwise to make any unreasonable attempts not to allow any of the three Icahn nominees onto its board," he said.
Kwak said only one outside director representing the U.S. investors would not likely affect the management significantly.
The top executive also said his company would put more focus on a long-term strategy to protect its managerial rights and increase shareholders' interest than on a short-term one.
"We expect pressure from the U.S. investors to continue, and are considering several measures to defend against threats to our management over the long term," Kwak said.
The tobacco manufacturer has been vulnerable to takeover bids by foreign investors because it is controlled more than 60 percent by foreign investors.
State-controlled Korea Industrial Bank owns 5.58 percent of KT&G, and 5.75 percent is held by KT&G employees. Japan Tobacco Inc. has a 1.76 percent stake, and other domestic investors hold the remaining stake.
The tobacco company is just one of more than 100 South Korean listed firms in which at least 5 percent is controlled by foreign investors for the purpose of influencing management decisions, according to the Financial Supervisory Service.
The Federation of Korean Industries, a lobbying group for the country's big conglomerates, warned Tuesday that a number of South Korean companies are vulnerable to hostile takeover bids by foreign investors, particularly from oil-rich countries which have huge currency reserves thanks to strong crude oil prices.
"Foreign speculative funds will focus on hostile takeovers against many companies in Asia," it said in a report.
Responding to the alarm, POSCO, the world's fifth-largest steel maker, called for the country's influential National Pension Service to buy more of its shares to help the company cope with any takeover bids by foreign investors.
Woori Bank president Hwang Young-key also called for unity of local financial institutions against foreign capital, saying the banking industry should learn lessons from KT&G. Woori Bank is a unit of South Korea's third-largest financial services business.
The country's top financial regulator, Fair Trade Commission Chairman Kang Chul-kyu, stressed the need to impose some restrictions on hostile takeovers of certain industries that are vital to national interests.
