Quad Asset Management has intensified pressure on Korea Terminal Industry by initiating procedures for the country's first shareholder derivative lawsuit this year. The governance conflict is escalating into a legal dispute as the activist fund targets the transaction structure with KT International, a private company owned by CEO Lee Won-jun, the second-generation heir of Korea Terminal.
According to investment banking industry sources on the 8th, activist fund Quad Asset Management has moved beyond shareholder engagement to begin shareholder derivative lawsuit procedures against Korea Terminal. Under the Commercial Act, a shareholder derivative lawsuit can proceed if the company's auditor (or audit committee) fails to take action within 30 days after receiving a request to file suit.
KT International, identified as the core of this conflict, is a private company in which CEO Lee, the second-generation owner, holds approximately 80% equity, with about 90% of its revenue dependent on Korea Terminal. Quad Asset Management has made the "sweetheart deal" issue surrounding this structure its key point of contention. Notably, questions were raised about KT International's revenue increasing even as Korea Terminal's performance slowed last year. Korea Terminal's 2025 revenue fell 4.4% year-on-year to 1.17 trillion won, while operating profit plunged 25.7% to 82.6 billion won. In contrast, KT International recorded revenue of 117.2 billion won and operating profit of 11.6 billion won, up 7.4% and 17.2% respectively.
Quad Asset Management's assessment is that by maximizing KT International's enterprise value through this transaction structure, the controlling shareholder could secure a favorable exit price if Korea Terminal acquires the company in the future. The fund also pointed out that the transaction structure with the controlling shareholder's private company could create conflicts of interest with minority shareholders during the management succession from founder Chairman Lee Chang-won to second-generation CEO Lee.
Quad Asset Management has demanded governance restructuring including the merger of KT International since the second half of 2024, but the conflict continues as Korea Terminal has not accepted these demands. The fund raised issues through an open shareholder letter last year and escalated pressure in February this year by requesting access to board meeting minutes and accounting records.
In response, Korea Terminal reflected some shareholder return measures including dividend increases and bylaw amendments at last month's annual general meeting, but the KT International issue was not included on the agenda, leaving the core dispute unresolved. The company has kept open the possibility of making KT International a subsidiary but maintains that a merger is not yet under consideration.
A Quad Asset Management official said, "Korea Terminal's profits are continuously being transferred externally through the intermediary distribution structure via KT International, and failing to address this constitutes shareholder value destruction. This could become even more problematic following the implementation of the revised Commercial Act last year, which expanded directors' fiduciary duty to include shareholders."