[Edaily Marketin JI YEONG-EUI Reporter Park So-young] Choi Won-jin, former deputy CEO of private equity fund (PEF) manager JKL Partners who led the investment in LS MnM, is expected to move to LS(006260), the holding company of the LS Group. LS is moving forward with plans to recruit Mr. Choi as an executive-level executive and is coordinating a schedule for him to join next month.

The issue is that JKL has not yet fully recovered its investment in LS MnM. Since the portfolio manager who led the investment is moving to LS—the counterparty in the transaction—issues such as the handling of confidential investment information and the prevention of conflicts of interest could become points of contention, depending on his future responsibilities.

Joining LS’s Executive Team on the Back of a 470 Billion Investment

According to investment banking (IB) industry sources on the 28th,

LS

is moving forward with plans to recruit former Deputy CEO Choi—who left JKL last February—as an executive-level executive. If the final terms are confirmed, he is expected to begin work in November. It is also understood that he may be included in the executive reshuffle scheduled for early next month.

A former official at the Ministry of Economy and Finance, Mr. Choi joined JKL in 2015 and served as a key investment manager, spearheading the acquisition of a controlling stake in LotteNon-LifeInsurance(000400) and the investment in LS MnM (formerly LS Nikko Copper). In the case of LotteNon-LifeInsurance, he took on the role of CEO immediately after the 2019 acquisition and was directly involved in its management.

Choi’s connection with LS began with the LS MnM transaction in 2022. At that time, LS acquired a 49.9% stake in LS MnM held by Japanese shareholders for 933.1 billion won. Of this amount, 470.6 billion won was funded through a joint purchase by JKL and VL Investment of exchangeable bonds (EBs) issued by LS.

The issue is that interests worth hundreds of billions of won related to that transaction still remain. Through ARTMS LLC, a joint investment company established by JKL and VL Investment, they exchanged the exchangeable bonds for LS MnM shares at the end of 2024, becoming the second-largest shareholder. Last March, when LS participated in a rights offering on its own, JKL’s investment company’s stake fell from 24.9% to 23.18%, but the recovery of the investment funds has not yet been finalized.

For this investment, JKL utilized its 5th Blind Fund (JKL No. 12), a fund worth approximately 750 billion won, in which the National Pension Service, the Korea Post, the Korea Development Bank’s Growth Support Fund, the Military Mutual Aid Association, and the General Assembly Pension Foundation are investors. VL Investment is reported to have participated in the joint investment through a separate project fund.

At the time of the investment, LS reportedly committed to listing LS MnM on the stock market by August 2027. However, uncertainty arose regarding the original plan as controversy grew over the duplicate listing of subsidiaries within a large conglomerate. It is reported that between August and September, the two sides discussed extending the listing deadline and the timing for the return of investment funds. Depending on whether the listing proceeds and the terms of contract fulfillment, the returns that limited partners (LPs) can secure and the costs LS will bear may vary.

In this context, it is noteworthy that former Deputy CEO Choi, who led the deal, is moving to the LS holding company. This is because if he becomes directly or indirectly involved in LS MnM’s future IPO or in exit negotiations with existing investors, how he manages the non-public investment information he acquired while at JKL could become a sensitive issue.

A Key Figure Who Led the Investment Joins Management... Managing Conflicts of Interest Is the Key Issue

However, it is difficult to raise legal objections to a private equity fund (PEF) portfolio manager moving to a company that was a past investment target or a transaction counterparty. While the current Capital Markets Act stipulates the fiduciary duties of general partners (GPs) of institutional-only private equity funds, it does not uniformly prohibit former portfolio managers from joining companies that were their transaction counterparties.

The key issue is the role that former Deputy CEO Choi will assume at LS. In particular, if he is directly involved in negotiations regarding the recovery of investment funds, it will be crucial to appropriately establish measures to protect confidential investment information and prevent conflicts of interest. While the job change itself does not violate the law, experts explain that it is necessary to review existing confidentiality obligations and investment information protection measures depending on his future responsibilities.

The issue of managing conflicts of interest ultimately ties into the interests of the fund’s limited partners (LPs). This is because the performance of funds in which institutional investors, such as the National Pension Service, have invested could vary depending on the terms of the LS MnM investment exit. However, the job change itself does not infringe upon the LPs’ interests. The key point is how LS will define the scope of duties for former Deputy CEO Choi and establish measures to protect existing investment information.

LS stated that it “cannot confirm” whether it is proceeding with the recruitment of former Deputy CEO Choi.