Famed activist fund KCGI said on Thursday that it has acquired a 7.05% stake in chip foundry DB Hitek.
The purchase makes KCGI, which stands for Korea Corporate Governance Improvement, the second largest shareholder of the chip company after DB Inc, which controls 12.42%.
KCGI said that it was acquiring the stakes in protest against DB Hitek’s recent decision to split off the company’s logic chip brand business, which was “done without proper communication with small shareholders.”
The matter was not urgent and DB Hitek needed to take efforts to collect votes from regular investors during its latest shareholders meeting, the activist fund said.
KCGI also alleged that if the chip company decided on the split to workaround South Korea’s fair trade laws on the rights of holding companies, this was short-sighted.
The motion to split off its logic chip brand business as a wholly owned subsidiary called DB Fabless was passed in the recent shareholders meeting.
The motion got the approval of 53% of shareholders with voting rights and 87.1% of those that partook in the meeting, but there were also those who openly voiced their opposition to the move during the meeting.
KCGI also demanded that DB Hitek retire some of its stock and form an independent board.
The fund’s move is likely to lead to a fight with other shareholders of DB Hitek.
Those related to the Kim family that runs DB Group own a combined 17.84%; DB Inc has 12.42%, DB Life 0.78% and DB Group founder Kim Jun-ki 3.61%.
The National Pension Service controls 8.34%; the remaining 75% is owned by small shareholders.
KCGI also has a history of fighting over managerial rights in the companies it invests in, most recently Hanjin KAL and Osstem Implant