SEOUL: Flashlight Capital Partners (FCP), a Singapore-based activist fund, on Monday offered to acquire the ginseng business unit of KT and G Corp., South Korea’s dominant tobacco company, for 1.9 trillion won (US$1.4 billion). The move underscores FCP’s ambitious strategy to transform Korea Ginseng Corp. (KGC) into a global wellness brand.
According to Yonhap News Agency, Yonhap, Flashlight Capital, a shareholder of KT and G, has officially submitted a letter of intent (LOI) to the tobacco company’s board, seeking to acquire a 100 percent stake in KGC. The proposed acquisition price is a 50 percent premium over the valuation range of 1.2-1.3 trillion won mentioned by KT and G’s CEO during the 2023 Investor Day.
KGC, a wholly owned subsidiary of KT and G, is at the heart of the proposed deal. KT and G’s portfolio includes traditional cigarette products and innovative offerings like the heat-not-burn product, lil. The activist fund has been vocal about its belief that KGC’s potential is not being fully reali
zed under the current corporate structure, which combines tobacco and ginseng operations.
FCP Managing Director Lee Sang-hyun expressed confidence in the strategic value of the acquisition. “We aim to develop Korea ginseng into a global brand, comparable to Manuka honey or Maotai,” Lee stated, highlighting the immense potential he sees in the ginseng unit.
This is not the first time FCP has attempted to influence the management decisions at KT and G. The fund has been advocating for the spin-off of the ginseng unit since 2022, describing the combination of tobacco and ginseng businesses as a “wrong marriage.” However, KT and G’s board rejected the proposal earlier this year.
In response to the current acquisition offer, KT and G noted that FCP had “unilaterally” sent the LOI to the board without prior discussions. “The company will take a closer look at the content of the proposal,” KT and G stated, indicating a cautious approach to the unsolicited bid.
Earlier in July, FCP criticized KT and G’s CEO compe
nsation program, arguing that it does not align with the company’s stock performance. This ongoing dispute highlights the fund’s active role in seeking changes within KT and G to enhance shareholder value.