Hyundai Securities up for bids

Hyundai Group has moved to sell more than 22 percent of Hyundai Securities as part of the troubled group’s efforts to accumulate cash to help out its struggling shipping affiliate.

EY Han Young, a Korean member of Ernst & Young and the sales adviser of the group, put a public notice on Wednesday that the group aims to sell a total of 22.56 percent of Hyundai Securities’ shares. The group was the largest shareholder of the brokerage.

Of the 22.56 percent, 22.43 percent is currently owned by the shipper Hyundai Merchant Marine (HMM), and the remaining 0.13 percent belongs to the group’s chairwoman, Hyun Jeong-eun, and her family. The shares are known to be worth 300 billion won ($247 million), but the price may rise as the sell-off gives the final winner the management rights as largest stakeholder.

The letter of intent for acquisition will be submitted by Feb. 29. This will allow the formal sell-off contract to be written sometime within March.

Industry insiders forecast that KB Financial Group and Korea Financial Holdings, the two financiers that failed at acquiring KDB Daewoo Securities last year, are likely to bid.

Others also named Pine Street Group, a global private equity fund, as a likely bidder, since it failed to grab Hyundai last year.

Analysts say that acquiring Hyundai Securities will offer the successful bidder the opportunity to expand its business or make good revenue out of it, whether it continues to operate the brokerage or sells it.

“Buying Hyundai Securities may be a smart decision because it is a large brokerage of which the equity capital is estimated to be about 3.2 trillion won. It also comes with management rights,” Seo Bo-ik, an analyst at Eugene Investment & Securities said.

“I think [buying the firm at about 300 billion won] is not much of a cost pressure considering the firm’s size, especially for those who want to expand their business, newly enter the brokerage business or for those private equity funds trying to sell it later for profit.”

Hyundai Group hopes to find a buyer for the brokerage and two other financiers, Hyundai Asset Management and Hyundai Savings Bank, to prepare an emergency fund for the debt-ridden shipper.

After it first rolled out a plan for raising 3.3 trillion won in 2013 to pay the shipper’s debt, the group has overachieved its goal by preparing liquidity worth 3.58 trillion won as of Dec. 31 last year through asset sell-offs, stock issuances and cost cutting.

Despite such efforts, HMM still has a long way to go. The Financial Services Commission has made it clear in an announcement at the end of December last year that local shippers should shave off their debt-to-equity ratio to 400 percent or lower in order to apply for more assistance. HMM’s debt-to-equity ratio reached almost 786 percent as of last September.

“We concluded that previous strategies were not enough to resolve HMM’s liquidity crisis, as there hasn’t been much sign of recovery in the global shipping industry,” the group said on Tuesday. “The sell-off decision [including the brokerage and two other financial affiliates] came after discussions with Korea Development Bank and other creditors.”

Hyundai Group plans to prepare 100 billion won in emergency liquidity, it said. Of the 100 billion won, 70 billion won will come from selling off partial assets of Hyundai Asan and Hyundai Securities, while the remaining 30 billion won will come from Chairwoman Hyun’s own pocket.

This is not the first time that Hyundai Group has attempted to sell the brokerage. HMM signed a sales contract with Orix Private Equity last June to sell 53.38 million Hyundai Securities shares that it owned, or 22.56 percent of the total, for 647.5 billion won.

The deal was broken four months later, when the Japanese equity fund canceled the purchase after being accused of a parking violation, in which an acquiring company pretends to have purchased the stocks and later gives them back to the seller. It also tried selling the brokerage and two other financial affiliates in 2013 to raise about 1.3 trillion won to fund the shipper.

Hyundai Securities shares went up 0.18 percent on Wednesday to close at 5,620 won, thanks to the sell-off expectations.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]