Flashlight Capital Proposes $1.4 billion Acquisition of KT&G’s Ginseng Business

• 50% premium over the valuation mentioned by KT&G in 2023
• Unravel the “wrong marriage” between tobacco and ginseng

Flashlight Capital Partners Pte. Ltd (“Flashlight Capital”), a shareholder of KT&G Corporation (KRX: 033780) (“KT&G” or the “Company”), announced that it has submitted a Letter of Intent (“LOI”) to KT&G's board of directors to acquire 100% of the shares in Korea Ginseng Corporation (“KGC”), a subsidiary of KT&G.

In its LOI, Flashlight Capital proposed acquiring 100% of KGC’s shares at KRW 1.9 trillion (approximately $1.4 billion), which represents a 50% premium over the KRW 1.2-1.3 trillion valuation mentioned by Kyung-Man Bang, KT&G’s current CEO, during Investor Day 2023.

“It’s like watching parents who downplay their own child,” said Sanghyun Lee, Managing Partner of Flashlight Capital. He added that “We see immense potential in the poor kid. We aim to develop Korea ginseng into a global brand, comparable to Manuka honey or Maotai.”

Despite the growing demand for health food, KGC’s operating profit halved from KRW 202.1 billion in 2019 to KRW 103.1 billion in 2023, and KT&G’s guidance indicates further decline in 2024.

Flashlight Capital has argued that the tobacco-ginseng pairing was a “wrong marriage”, and that KGC’s value is not reflected in KT&G's stock price at all. Since 2022, Flashlight Capital has advocated for a horizontal spin-off of KGC, but KT&G’s board rejected the proposal in 2023, with no clear rationale.

Sanghyun Lee compared KT&G’s stance on KGC as, “Not good enough for me, but too good for others.” He emphasized the need for either a spin-off or sale of KGC, and warned that, “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.”

About Flashlight Capital

Flashlight Capital Partners Pte. Ltd is an investment management firm founded by the Carlyle Group’s former Head of Korea, Sanghyun Lee. Based in Singapore, Flashlight Capital is dedicated to strengthening corporate governance and enacting transformative change to its portfolio companies. For more information about Flashlight Capital, please visit www.FlashlightCap.com.

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