Billionaire in play for Korean tobacco

Billionaire Carl Icahn nominated fellow investor Warren Lichtenstein and two other executives to the board of KT&G, driving shares of South Korea's largest tobacco company up by their daily limit.

Funds controlled by the US investors yesterday proposed Lichtenstein, Howard Lorber and Steven Wolosky to contest seats at Seoul-based KT&G's annual shareholder meeting. The funds said on Friday they held a combined 6.6 per cent of KT&G, with the intention of influencing management.

By nominating Lichtenstein, Icahn is increasing pressure on KT&G's management to sell the company's real estate business and spin off its ginseng operations. Icahn, who is waging a fight with Time Warner, scored a victory last week when he reaped a 63 per cent return on his investment in a Canadian hotel group by pushing the company to sell itself.

"Icahn is in a good position," said Kim Hyun Tae of Landmark Investment Management in Seoul. "By pressuring KT&G's management, he can probably receive higher dividends while driving up the company's stock price."

Icahn is joining Kohlberg Kravis Roberts in seeking buyout opportunities in Asia. Firms such as Warburg Pincus and Carlyle Group invested US$10.1 billion ($14.76 billion) in Asia in the nine months to September 30, up 40 per cent from a year earlier, according to the Centre for Asia Private Equity Research in Hong Kong.

KT&G shares gained as much as 15 per cent, the maximum allowed under exchange rules, to a record 59,300 won ($89). Icahn and Lichtenstein may seek to get support from other shareholders to influence KT&G's management.

Franklin Mutual Advisers, which holds a 6.77 per cent stake in KT&G, said in June its affiliate Templeton Asset Management will participate in the management of the tobacco company. Templeton Asset Management has a 0.37 per cent stake in the tobacco company.

Icahn, 69, is pushing Time Warner to sell its cable-TV unit and buy back US$20 billion of stock. Icahn stands to make 63 per cent on his US$185 million investment in Toronto-based Fairmont Hotels & Resorts after the group last week agreed to be acquired for US$3.24 billion.

- BLOOMBERG