Schindler’s Real Intentions
SEOUL, Feb. 7 (Yonhap) -- The chief of Schindler Holding AG said that buying Hyundai Elevator Co.’s lift business can still be considered if conditions permit, although he does not think such a development is likely to occur without outside intervention.
In a telephone conference with journalists, Alfred Schindler stressed that he had no intention of pursuing a hostile takeover of the South Korean company that enjoys about a 42 percent of market share in the country.
He stressed that such actions, based on his experience, will be detrimental to the Swiss company in the long run, which has seen its size rise sharply under the chairman’s leadership.
The 65-year-old entrepreneur also said that due to the complicated circular ownership structure that Hyundai Elevator is locked into at the moment, he did not think it likely that the letter of intent (LOI) reached between Schindler and Hyundai would be followed through at present. The letter, which was later dissolved by mutual agreement, calls for the vertical spin-off of Hyundai’s elevator business into a new joint company, with Schindler a holding 60 percent stake and management rights.
On the other hand, the Chairman, who has made his moving solutions provider the second largest in the world, hinted that shareholders like Schindler can take a wait and see approach.
“We can write off 100 percent of our investments and wait,” he said.
In this case, he said the global shipping business that has caused Hyundai Elevator to engage in money losing derivatives contracts could improve, or there could be a move to force a corporate restructuring by the South Korean company’s creditor banks, or direct intervention by state regulators like the Financial Supervisory Service. Such a move may lead to the sale of the elevator company.
“We would look at [the possible purchase] seriously," he said, although making it clear that it would only be part of a joint venture with a strong South Korean partner as originally envisioned.
He then said that while Schindler’s board will meet soon to decide on what to do, another option is to sell the company’s 30.89 percent stake in Hyundai and leave.
Such a move could cause stock prices to collapse, irrevocably hurting the company’s reputation as the world’s fourth largest elevator market.
Schindler argued that it is because of such reasons, and to limit further losses to investors, that his company has opted to boycott the paid-in capital increase planned by Hyundai for this month.
He did not go into too much detail, but said the company has already sold some of its rights on the market at a loss. By boycotting the capital increase, Schindler’s stake in the elevator company could fall to 21 percent from a peak of 35 percent in the past.
The CEO again confirmed that he did not think the capital increase is a way to help the company and that Hyundai Elevator is being used to prop up Hyundai Merchant Marine. The shipping line is viewed as a key part of the ownership structure that is keeping Hyundai Group Chairwoman Hyun Jeong-eun in control of the whole conglomerate.
Both Hyundai Elevator and the shipping company are part of the larger Hyundai Group, one of South Korea’s family-run businesses.
Related to the claims made by the Swiss company, Hyundai Elevator countered that it has made clear that it does not want to sell its elevator business, and that Schindler’s desire to create a joint venture with itself in charge goes against corporate ethics.
The company has hinted that Schindler’s true intent is to take over the elevator business from Hyundai.
It also argued that the understanding on the spin-off of the elevator arm was only reached when the company was besieged by hostile takeover attempts by KCC and Hyundai Heavy Industries Co. in 2004 and 2006.
The company, moreover, contested Schindler’s claim that it had suffered huge losses by pointing out that from 2006 when the holding company bought Hyundai Elevator’s stake to 2010, it had actually made money.
“From our estimate, it poured around 250 billion won [US$232 million] to buy stakes, and because their value now stands at 183 billion won, it lost only 67 billion won,” a corporate source said.
The remark comes after Schindler on Jan. 10 filed a legal suit with a South Korean court claiming 700 billion won (US$651 million) in damages.
He then said that the Swiss company’s decision to not take part in the capital increase may be seen as an attempt to cause a further drop in share prices, which would make it hard for the elevator company to generate cash and bring about a liquidity crunch that could force the sale of the elevator business.
“Schindler had shown persistent interest in taking over the elevator business,” the insider said.
On the standoff, industry sources in Seoul speculated that while Schindler has said it has no faith in Hyundai, it may wait to see the outcome of its legal battle, as well as those being waged by other minor investors against the South Korean elevator company.
“Schindler knows the Asian market, including India, currently accounts for 70 percent of the world’s elevator business, so it is unlikely to give up its presence and walk away,” one market watcher said.