Creation of Holding Company

Hyundai Heavy Industries (HHI) Group will establish tentatively named “Hyundai Robotics” as an operating holding company.
Hyundai Heavy Industries (HHI) Group will establish tentatively named “Hyundai Robotics” as an operating holding company.

 

Until now, Hyundai Heavy Industries Co. (HHI), the world's biggest shipbuilder, has said that its spin-off is just for survival. However, the company officially announced to set up its holding company for the first time.

HHI said on January 18 that it will establish tentatively named “Hyundai Robotics” as an operating holding company under the Fair Trade Act. The company announced its plan to split its divisions into six independent companies at the end of last year. Under the plan, its Shipbuilding, Offshore & Engineering and Engine & Machinery Division will form new Hyundai Heavy Industries while the existing non-shipbuilding divisions of Electro Electric Systems, Construction Equipment, Robotics, Green Energy Division and Integrated AS unit will be separate business entities tentatively named as Hyundai Electric & Energy System, Hyundai Construction Machinery, Hyundai Robotics, Hyundai Heavy Industries Green Energy, and Hyundai Global Service respectively.

HHI’s spin-off plan has been considered the groundwork for switching to a holding company system. This is because Hyundai Robotics will meet the requirement of holding company when it acquires its 13.4 percent stake owned by HHI and a 91.1 percent stake owned by Hyundai Oilbank in the process of spin-off.

Its largest shareholder Chung Mong-joon, chairman of ASAN Foundation, holds a 10.2 percent stake in Hyundai Robotics and Hyundai Robotics will take a 13.4 percent stake of HHI, Hyundai Electric and Hyundai Construction Machinery and a 91.1 percent stake of Hyundai Oilbank.

HHI has the structure of holding company system with the equity spinoff, but it will keep working on arranging shares in order to complete the foundation of holding company. First of all, Hyundai Robotics needs to additionally secure a 13.4 percent stake of HHI, Hyundai Electric and Hyundai Construction Machinery according to the Fair Trade Act which requires a holding company to own more than 20 percent stakes in subsidiaries.

In this regard, HHI said, “We will satisfy the requirement of holding company by securing additional shares at an appropriate time after May when a newly established company is relisted.” The terms is two years.

HHI also needs to eliminate cross-shareholding created in the process of equity spin-off. The current Fair Trade Act prohibits business groups with assets of more than 5 trillion won (US$4.27 billion) from having additional cross-shareholding in subsidiaries. However, it allows a grace period of six months.

The group added a new cross-shareholding cycle of Hyundai Robotics to HHI, Hyundai Samho Heavy Industries, Hyundai Mipo Dockyard and Hyundai Robotics from the existing HHI to Hyundai Samho Heavy Industries, Hyundai Mipo Dockyard and HHI. Hyundai Mipo Dockyard is expected to sell its 8 percent stake in HHI by October. 

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