[Intl-tobacco] Carl Icahn targets South Korean tobacco giant

[robert weissman]

Billionaire US investor targets South Korean tobacco giant

AFP
January 18, 2006

SEOUL (AFP) - South Korea's giant state tobacco and ginseng group KT&G
says it would
resist pressure from billionaire US investor Carl Icahn to take measures
to raise
its share price.

KT&G said it was contacted by Icahn's representative last October after
the US
investor bought a stake of less than five percent in the former
government monopoly.

"Like other foreign investors, Icahn wants us to take steps aimed at
raising our
share price," a KT&G official told AFP.

"Regardless of their demands, we will stick to the philosophy of our
management," he
added.

The official, who asked not to be named, conceded that the South Korean
firm was
wary of an investor who made his name on Wall Street as a corporate raider.

"We are watching their next move," he said. "However, we intend to treat
Icahn as
just one of our foreign investors."

KT&G, with a market value of about 7.7 billion dollars and 75 percent of the
country's tobacco market, posted a net profit of 472 billion won (475
million
dollars) in 2004 on sales of 2.65 trillion won.

In 2005, the company's shares rose by more than 50 percent but some foreign
investors, who hold a combined 62 percent of KT&G, believe the company
is still
undervalued and should list its fast-growing ginseng unit.

KT&G shares rose 2.2 percent to 47,950 won in morning trade Wednesday, with
investors believing the company will be under pressure from foreign
shareholders to
improve its corporate governance.

The KT&G official, however, ruled out any hostile takeover bid.

"Our corporate governance is clean, with our shares held by many small
shareholders," the official said.

KT&G, which was founded more than a century ago as a state monopoly for
tobacco and
ginseng, providing a steady source of revenue for government, was
privatized in late
2002.

The privatization prompted KT&G to promote exports, increase sales at
its ginseng
unit and branch out into non-tobacco businesses such as real estate deals.

It now faces an overall decline in tobacco consumption and challenges
posed by
foreign competition. Its domestic market share has delinced since the
government
raised the tax on cigarettes in December in a bid to reduce smoking.

The move by Icahn, who is also engaged in a proxy fight to replace the
board of Time
Warner, the world's larest media company, comes amid growing economic
nationalism in
South Korea.

In July, 2005 Sovereign Asset Management sold off its controversial 14.8
percent
stake in SK Corp, the country's largest oil refiner, after a two-year
dispute with
SK Corp management over governance issues.

Sovereign had sought to oust SK Corp Chairman Chey Tae-Won, triggering a
debate
about the role of foreign investors in South Korean companies and corporate
governance in general.

Sovereign is estimated to have earned a more than 800 billion won profit
from the sale.

http://news.yahoo.com/s/afp/20060118/bs_afp/skoreatobaccouscompany_060118040806