Tuesday, October 5, 2010

A Tale of Two Hyundais Fighting Over a Third Hyundai...


Bear with us, as this could get very confusing. The Wall Street Journal is reporting the Hyundai that manufactures cars [aka the Hyundai Motor Group] and the Hyundai that builds ships and makes elevators [aka the Hyundai Group] are competing for a US$3 billion stake in the Hyundai that constructs buildings [aka the Hyundai Engineering & Construction Co.]

We warned you this could get confusing...

So here's the short version: Hyundai Motor Co and Hyundai Engineering & Construction used to be part of the Hyundai Group, South Korea's largest conglomerate. In the wake of the 1997/98 Asian financial crisis, the two companies split from the conglomerate and went their separate ways.

Hyundai Motor Co spun-off to become part of the Hyundai Motor Group and in 2001 Hyundai Engineering fell under creditor control after a multitrillion won bailout and a 2.9 trillion won ($2.54 billion) debt-for-equity swap. Now these creditors, which include the Korean Exchange Bank, are selling up their share 34.88% share in Hyundai Engineering.

Still with us? Good.

So the only links between these three companies now are familial: Hyundai Motor Group Chairman Chung Mong-koo is the second son of Hyundai Engineering founder Chung Ju-yung, and Hyundai Group Chairwoman Hyun Jeong-eun is Chung Ju-Yung's daughter-in-law (that's her pictured on the right).

Hyundai Engineering also owns a 8.3% stake in Hyundai Merchant Marine, which is part of the Hyundai Group. This stake makes it an especially juicy proposition for both the Hyundai Group and Hyundai Motor Group.

Insiders have said that so far Hyundai Group and Hyundai Motor Group are the only ones to send in letters of interest. Analysts believe that Hyundai Motor Group has the best chance of winning the stake, as subsidiary Hyundai Motor Co alone has available capital to the tune of 7.28 trillion won (US$6.5 billion). This is over six times what the Hyundai Group has, forcing it to make a joint bid with German engineering firm M+W Group.

Formal bids for Hyundai Engineering are due by the 12th of November, with a preferred bidder set to be chosen in December.

By Tristan Hankins

Source: WSJ