Cross-shareholding Interception
The Fair Trade Commission (FTC) has ordered Hyundai Motor Group to resolve its cross-shareholding ties derived from an intra-group merger and acquisition (M&A) between its two steelmaking units, after Samsung.
According to the FTC on Dec. 30, it has ordered Hyundai Motor Group to cut cross-shareholding chains, which had strengthened in the merger of Hyundai Steel Co. and Hyundai Hysco, on Dec. 24. The FTC told the group to sell 8.81 million shares that it holds in the unified Hyundai Steel.
On the same day, the FTC also called on Samsung to resolve cross-shareholding ties, which were increased after the merger with former Samsung C&T and Cheil Industries. The FTC grants a grace period of six months to cut shareholding chains, which are created and strengthened in mergers. Since the merger of Samsung C&T was completed on Sept. 1, Samsung still has two months to sell shares by March 1. However, the merger registration date of Hyundai Steel was July 1, so the Hyundai Motor Group must reduce their holdings in Hyundai Steel by Dec. 31. When Hyundai Motor group fails to resolve cross-shareholding ties within the period, the FTC can impose fines of up to 10 percent of the acquisition prices of the additional shares they have in Hyundai Steel as well as corrective measures, including stock disposal instruction.
The Hyundai Motor Group has said it will cut the cross-shareholding relationships strengthened in the merger. However, there is controversy over the fact that the FTC has ordered the company to sell shares worth 460.7 billion won (US$392.75 million) a week before the end of the grace period. This is because it is realistically impossible to sell shares worth more than 400 billion won (US$341 million) in a week.
An official from Hyundai Motor Group said, “We believe that the FTC gave us a late notice due to careful consideration of the legal applications. Since the sudden sales of shares can have adverse effects on the stock prices of Hyundai Steel and confuse the market, we are planning to ask the regulator to extend the grace period for the sale.”