Flashlight Capital Partners has signed a Letter of Intent (LOI) with Korea Tobacco and Ginseng Corp. (KT&G) to acquire the latter’s subsidiary Korea Ginseng Corp. (KGC).
Under the terms of the LOI, Flashlight Capital would acquire 100% of KGC’s shares for up to KRW1.9tr ($1.4bn), a 50% premium over the KRW valuation announced in 2023.
Flashlight Capital is a Singapore-based investment management firm and a minority stakeholder in KT&G.
The activist investor said the combination of tobacco and ginseng was a mismatch and KGC’s value is not reflected in KT&G’s stock price.
Flashlight Capital managing partner Sanghyun Lee said: “It’s like watching parents who downplay their own child. We see immense potential in the poor kid. We aim to develop Korea ginseng into a global brand, comparable to Manuka honey or Maotai.”
He added: “If KT&G’s board opposes our proposal without a proper rationale, it will only prove that they are serving the interests of management rather than those of the shareholders.”
Flashlight Capital has advocated for a horizontal spin-off of KGC since 2022, but KT&G’s board rejected the proposal last year, with no clear rationale.
Sanghyun Lee said that KT&G’s stand on KGC is only good for others and emphasised the need for either a spin-off or sale of KGC.
Ginseng is the root of plants in the genus Panax, characterised by the presence of ginsenosides and gintonin, and is commonly used in the cuisines and medicines of China and Korea.
