Share sale excites Chung interest

The family that owns Hyundai is calculating the odds as it prepares to sell a large part of its shareholdings in Hyundai Heavy Industries Group later this year.

The group, an assortment of shipyards and basic chemical companies under the flagship company Hyundai Heavy Industries, will have to sell 400 billion won ($339 million) of its shares in other Hyundai family companies to meet the self-rescue plan it proposed earlier this year.

It’s a delicate dance. The empire founded by Chung Ju-yung split after his death in 2001 with several Hyundai groups emerging. With this share sale, the balance of power among the Chung descendants - some friendly with each other and some not so - could shift. Complicating the matter is that the various Hyundai brands are linked in an intricate shareholding web that was designed to keep the group in family hands and fend off takeover attempts. But gradually and now more insistently, the government is demanding more transparency.

Of the other Hyundai shares held by the shipbuilding group, a stake of 0.75 percent of Hyundai Motor has the highest market value, of about 230 billion won. While the ownership ratio may be small, it is large enough to be important in the automaker’s efforts to acquire more of its own shares to meet the demands of Korea’s Fair Trade Commission. The commission warned most recently on May 19 that the company must move more quickly to simplify the complicated interlocking ownership relationship with its affiliates.

Although the Chungs collectively own only a small amount of Hyundai Motor Group, they control 51 affiliates of the group through several interlocking investment structures. One such circle, for example, is that Hyundai Mobis controls Hyundai Motor, Hyundai Motor controls Kia Motors and Kia Motors controls Hyundai Mobis. Therefore, Hyundai Motor is able to control Hyundai Mobis even though Mobis, its largest shareholder, should be in the driver’s seat.

Hyundai Motor Group Chairman Chung Mong-koo and his son Chung Eui-sun have together a 7.45-percent stake in Hyundai Motor. If they buy Hyundai Heavy Industries Group’s stake in the auto company, it would help in bolstering their ownership position. Chung Mong-joon, a younger brother of Chung Mong-koo and head of Hyundai’s Asan Nanum Foundation, handed over a 2.28-percent stake in Hyundai Motor to his nephew Chung Eui-sun last year.

Hyundai Corporation Chairman Chung Mong-hyuk also has a relatively low stake (17.5 percent) in the corporation’s holding company, Hyundai C&F. The second-largest shareholder, KCC, holds a 12-percent stake in the company. To take more secure control of the company, Chung Mong-hyuk wants to widen that difference between 17.5 percent and 12 percent. HHI Group’s 10.1 percent stake in Hyundai C&F and 2.9 percent stake in Hyundai Corporation are vital to do that.

Hyundai Heavy Group holds 14.7 percent of Hyundai Merchant Marine, which it is preparing to sell to raise restructuring cash, with financial contributions by other large shareholders. Those other owners have agreed to dilute Hyundai Merchant Marine’s share price and boost its capital; the upshot will be that Hyundai Heavy’s holdings in the merchant marine subsidiary will rise to 17.4 percent.

Korea Development Bank, a main creditor, will become the top shareholder of Hyundai Merchant Marine in the process, with about 40 percent ownership. When, as expected, the bank puts the shipping subsidiary up for sale, the 17 percent now held by Hyundai Heavy Industries Group could decide who will buy the firm and whether or not the buyer will have majority control of the shipping line.

BY MOON HEE-CHUL [kim.jeehee@joongang.co.kr]