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Hyundai Motor Group to Streamline Ownership Structure by Resolving Circular Shareholdings
Improving Governance Structure
Hyundai Motor Group to Streamline Ownership Structure by Resolving Circular Shareholdings
  • By Yoon Yung Sil
  • March 29, 2018, 01:15
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Hyundai Motor Group is going to remove completely all the cross-shareholding ties through the sale and the purchase between large shareholders.
Hyundai Motor Group is going to remove completely all the cross-shareholding ties through the sale and the purchase between large shareholders.

 

Hyundai Motor Group announced plans on March 28 to streamline its overall governance structure by resolving the cross-shareholding ties between four major subsidiaries – Hyundai Mobis Co., Hyundai Motor Co., Kia Motors Corp. and Hyundai Steel Co.

Large shareholders, including Hyundai Motor Group Chairman Chung Mong-koo, will acquire all Hyundai Mobis shares held by other affiliates to simplify the group's governance structure.

“We will completely remove all the cross-shareholding ties through the sale and the purchase between large shareholders, including Hyundai Motor Group Chairman Chung Mong-koo and Hyundai Motor Group's heir apparent Vice Chairman Chung Eui-sun, and the group’s affiliates,” aid Hyundai Motor Group.

Hyundai Mobis held a board meeting on March 28 and agreed to spin off the module manufacturing and after-sales parts business of auto parts maker Hyundai Mobis Co. and then merge it with logistics firm Hyundai Glovis Co. After the spin-off, Hyundai Mobis will focus on component manufacturing business.

Hyundai Motor Group said that the spin-off merger is subject to shareholders’ approval at Hyundai Mobis and Hyundai Glovis’ general meetings both scheduled on May 29. If approved, the change will go into effect in early July, followed by modified listing of Hyundai Mobis shares and additional listing of Hyundai Glovis shares starting late July.

After the spin-off, Kia Motors, Hyundai Glovis and Hyundai Steel will hold a board meeting again to consider selling their shares of Hyundai Mobis to Hyundai Motor Group Chairman Chung Mong-koo and Vice Chairman Chung Eui-sun. In this case, Chairman Chung Mong-koo will secure a control over Hyundai Mobis by purchasing a total 23.3 percent stake in the company, including 16.9 percent of the shares owned by Kia Motors, 0.7 percent by Hyundai Glovis and 5.7 percent by Hyundai Steel.

Currently, Hyundai Mobis, a core affiliate of four cross-shareholding ties, is a de facto holding company. Hyundai Motor Group’s major circular shareholdings are “Hyundai Motor-Kia Motors-Hyundai Mobis-Hyundai Motor,” “Hyundai Motor-Kia Motors-Hyundai Steel-Hyundai Mobis- Hyundai Motor” and “Hyundai Motor-Hyundai Glovis-Hyundai Mobis-Hyundai Motor.”

The group said, “Chairman Chung Mong-koo and Vice Chairman Chung Eui-sun are planning to raise funds needed to acquire shares of Hyundai Mobis by selling their Hyundai Glovis stocks to Kia Motors. Then, Hyundai Motor Group will completely resolve its four cross-shareholding ties.”

Chairman Chung Mong-koo and Vice Chairman Chung Eui-sun holds a 23.29 percent stake and a 6.71 percent stake in Hyundai Glovis, respectively. When combining all the shares of Hyundai Motor and Hyundai Motor Chung Mong-Koo Foundation, the two holds a 51.38 percent stake which is enough to maintain the control.

When all the plans are completed, large shareholders, including Chairman Chung Mong-koo, will become the largest shareholder of Hyundai Mobis, while Hyundai Motor becomes a subsidiary of Hyundai Mobis, Kia Motors a subsidiary of Hyundai Motor and an affiliated firm of Hyundai Mobis. Hyundai Motor and Kia Motors will own Hyundai Steel and Hyundai Glovis.

Hyundai Mobis holds a 20.78 percent stake in Hyundai Motor and the stake increases to 28.24 percent when combining the stake owned by family members of the founder, including Chairman Chung Mong-koo, and specially related persons. Hyundai Motor holds a 33.88 percent stake in Kia Motors and Kia Motors and Hyundai Motor holds 17.27 percent and 6.87 percent stakes in Hyundai Steel, respectively. Chairman Chung Mong-koo also owns ab 11.81 percent stake in Hyundai Steel.

An official from the group said, “We have been seeking the best way to secure the competitiveness that can last for 10 to 20 years and more as well as to improve the governance structure. With the new plans, we will be able to not only bring more transparency to management but also strengthen our shareholder-centered management culture further.”