South Korean cigarette manufacturer KT&G, under pressure from activist shareholders like US billionaire Carl Icahn, unveiled an ambitious plan on 9 August 2006 that it says will increase shareholder value.

Icahn, fund manager Warren Lichtenstein and other investors, who together control 7.68 per cent of the former government tobacco monopoly, have been pressing for concessions all year. KT&G announced it will spend 2.8 trillion won (US$ 2.9 billion) over the next three years to improve its returns to shareholders through measures including dividend increases, selling real-estate holdings and buying back then cancelling shares. Investor activism practiced by Icahn, long known for shaking up corporate boardrooms in the United States, is controversial in South Korea, which remains ambivalent about the role of foreign capital in the world's 10th-largest economy.
The investors, who are the second largest shareholders in KT&G, suggested earlier this year they were ready to purchase the company. That raised alarm bells in South Korea, where there has never been an unsolicited buyout of a local company by foreign investors. Investors took a positive view of the plan, pushing KT&G's share price 2.1 per cent higher to 58,700 won (US$ 61).
KT&G said last month that net profit in the three months ended June 30 rose 16 per cent to 156.07 billion won from the same period last year on robust sales of high-end cigarettes at home and overseas. There appeared, however, to still be room for future argument as the two sides remained at odds over a key issue: the listing of a profitable unit that manufactures products related to the Korean root ginseng, popular for its perceived health benefits. "The company will make the unit a springboard for further growth in the future," KT&G Chief Executive Kwak Young-kyoon told reporters, emphasizing that the domestic health food market is showing annual growth of more than 15 per cent. He said KT&G had no plans to list the unit. Lichtenstein, in his statement, said the investors agreed with management's decision to develop the ginseng business "before spinning it off as a separately listed entity."

, fund manager Warren Lichtenstein and other investors, who together control 7.68 per cent of the former government tobacco monopoly, have been pressing for concessions all year. KT&G announced it will spend 2.8 trillion won (US$ 2.9 billion) over the next three years to improve its returns to shareholders through measures including dividend increases, selling real-estate holdings and buying back then cancelling shares. Investor activism practiced by Icahn, long known for shaking up corporate boardrooms in the United States, is controversial in South Korea, which remains ambivalent about the role of foreign capital in the world's 10th-largest economy.
The investors, who are the second largest shareholders in KT&G, suggested earlier this year they were ready to purchase the company. That raised alarm bells in South Korea, where there has never been an unsolicited buyout of a local company by foreign investors. Investors took a positive view of the plan, pushing KT&G's share price 2.1 per cent higher to 58,700 won (US$ 61).
KT&G said last month that net profit in the three months ended 30 June 2006 rose 16 per cent to 156.07 billion won from the same period last year on robust sales of high-end cigarettes at home and overseas. There appeared, however, to still be room for future argument as the two sides remained at odds over a key issue: the listing of a profitable unit that manufactures products related to the Korean root ginseng, popular for its perceived health benefits. "The company will make the unit a springboard for further growth in the future," KT&G Chief Executive Kwak Young-kyoon told reporters, emphasizing that the domestic health food market is showing annual growth of more than 15 per cent. He said KT&G had no plans to list the unit. Lichtenstein, in his statement, said the investors agreed with management's decision to develop the ginseng business "before spinning it off as a separately listed entity."