Posco, Hyundai selling affiliates to restructure

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Posco, Hyundai selling affiliates to restructure

Two Korean conglomerates that are trying to improve their financial health, Posco and Hyundai, announced yesterday that they are selling some affiliates.

Posco, the nation’s sixth-largest conglomerate, said yesterday that to raise cash it is selling its liquefied natural gas (LNG) terminal at the Gwangyang steel mill; Posfine, a slag powder producer; and its afforestation company Posco Uruguay.

Posco also announced that Deutsche Bank will be the adviser for its LNG terminal sale, while the Posfine and Posco Uruguay sales will be managed by Samil Accounting Corp. and Anjin Accounting Corp. respectively.

Korea’s largest steelmaker said it will designate the LNG terminal as a separate business and sell some shares of that company, but Posco will keep enough shares to maintain management.

Posco claimed that its LNG terminal, which was completed in 2005, is the nation’s only privately run LNG base and said there is lots of demand for the facility, which has four tanks and can store 530,000 kiloliters of LNG.

“From local power generators and Japan’s trading company Itochu, we have been expanding our leases of LNG tanks and have guaranteed a stable cash flow,” Posco said in a release.

The conglomerate run by Chairman Kwon Oh-joon said that the group is selling Posfine, which provides slag powder to cement manufacturers, to focus on other materials businesses.

Posfine was established in 2009 to deal with slag, a by-product of steelmaking, and it had an operating profit ratio of 12.8 percent last year.

Posco said that it is selling Posco Uruguay because of government regulations.

The company was established in 2009 and bought 1,000 hectares of land for afforestation, which it aimed to trade for carbon emission rights.

Initially, Posco thought that it could bring carbon emission rights acquired overseas back to Korea, but under a law enacted in 2012, overseas carbon emission rights can’t be used until 2020.

“We expect to recover our credit rating and raise our company value by selling non-core businesses,” Posco said in the release. “We will keep restructuring our affiliates that are less competitive and also improve finances by listing healthy affiliates on the stock market.”

Meanwhile, Hyundai Group, the nation’s 21st-largest conglomerate, said that it is selling its 88.8 percent stake in Hyundai Logistics to Japanese financial company Orix Corp. for 600 billion won ($583 million).

The group decided that Hyundai and Orix will establish a special purpose company (SPC) to control Hyundai Logistics. Orix will have a 70 percent share in the SPC after investing 240 billion won and Hyundai will have the rest.

As part of the restructuring, Hyundai said it will buy the 19.95 percent stake in Hyundai Elevator that is owned by Hyundai Logistics in order to solidify the group’s management structure. Hyundai Group has a cross shareholding structure in which Hyundai Elevator plays a core part.

With the sale of Hyundai Logistics, the conglomerate said that it has secured 2.7 trillion won, or 80 percent of its 3.3 trillion won cash-raising plan.

“We have collected better-than-expected results, like securing liquidity and lowering our debt ratio by pushing measures that are more aggressive than our original plan,” Hyundai said in a release. “We believe this will be an opportunity to rebound.”

BY joo kyung-don [kjoo@joongang.co.kr]

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