Hyundai Restructuring

The Hyundai Motor Company’s headquarters in Seoul is located in the Yangjae district, along with the offices of Kia Motors and the two companies’ parent corporation, Hyundai Motor Group. (Photo by Chu via Wikimedia Commons)
The Hyundai Motor Company’s headquarters in Seoul is located in the Yangjae district, along with the offices of Kia Motors and the two companies’ parent corporation, Hyundai Motor Group. (Photo by Chu via Wikimedia Commons)

 

The Hyundai Motor Group is changing its shape aggressively by merging duplicate businesses, and the owners selling their shares in subsidiaries. Experts interpret this as a starting point for corporate ownership structure reform revolving around Vice President Chung Eui-sun.

According to industry sources, Hyundai WIA will merge itself with Hyundai Wisco and Hyundai Metia on November 1. Hyundai WIA, the largest shareholder of which is Hyundai Motor Company, is an auto parts manufacturer supplying transmissions, platform modules, chassis modules, power trains, and other parts. Hyundai WIA is the largest stockholder of Hyundai Metia, with a share ratio of 50.94 percent. The latter, which produces castings for auto parts, recorded 356.7 billion won (US$348 million) in sales last year. Hyundai Wisco is responsible for the manufacturing and sale of castings, and posted 613.5 billion won (US$600.0 million) in sales in 2013.

“We will further enhance our competitiveness in the metallic materials field through the merger, and provide our shareholders with higher returns and corporate value,” said Hyundai WIA, adding, “Our synergy will be maximized through efforts for management efficiency improvement.”

Hyundai AutoEver will absorb Hyundai Consulting & Information (C&I) on the same date. “The consolidation is to combine two system integration firms in the same group in the interest of business efficiency,” it explained.

Economists see the moves as a sort of groundwork for ownership structure reform. At present, Vice President Chung Eui-sun is in possession of 347,241 shares (57.87 percent) in Hyundai Wisco. Once the merger is done, he gets 1.95 percent of Hyundai WIA with higher enterprise value than before.

“Hyundai WIA is about to join the ranks of the Hyundai Motor Group subsidiaries, where the largest stockholders own shares as in Hyundai Motor Company, Kia Motors, Hyundai Mobis, Hyundai Steel, and Hyundai Glovis,” said KDB Daewoo Securities research analyst Park Young-ho, continuing, “Such a position will be a boon to its stock prices down the road.”

The Vice President sold 30 percent of his shares in Innocean on August 14 to Morgan Stanley Private Equity, Standard Chartered, Isolar Capital, and the like at a price of 300 billion won (US$293.2 million). On the face of it, the move looks to be aimed at reducing internal transactions between subsidiaries, but some have said the disposal of the shares is to prepare financial resources before corporate succession.

Under the circumstances, expectations are going up for a merger between Hyundai Engineering and Hyundai Engineering & Construction, and ownership structure reform in Hyundai Mobis and Hyundai Glovis. “Although it is true that the vice president comes to own Hyundai WIA shares for the first time, the shareholding ratio is just 1.95 percent,” Hyundai Motor Company emphasized in response, adding, “The merger is solely for more successful business in the auto parts sector and has nothing to do at all with corporate succession.”

In the meantime, the Hyundai Motor Group had consolidated the automotive steel sheet business units of Hyundai Steel and Hyundai Hysco last year, while merging Hyundai AMCO with Hyundai Engineering.

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