Hyundai Motor Group IT units' merger faces bumpy road

By Nam Hyun-woo

The proposed merger between Hyundai Motor Group's three automotive software affiliates is facing a bumpy road ahead as minor shareholders raised opposition to the stock swap ratio for the merger.

According to 38 Communication, an unlisted stock trading portal here, a number of Hyundai MnSOFT shareholders posted statements reflecting their opposition to the proposed three-way merger between Hyundai AutoEver, Hyundai Autron and MnSOFT.

They also posted similar statements on Cheong Wa Dae's public petition website which 356 people have signed as of Friday.

On Dec. 11, AutoEver announced it will merge the two affiliates, as part of Hyundai Motor Group's bid to improve its readiness in the advanced mobility market by integrating the software businesses. If the merger proposal is approved at a shareholders' meeting on Feb. 25, AutoEver's presence in the group will grow significantly, as it will be in charge of software for advanced mobility technologies.

For the merger, AutoEver will issue new shares and swap them with MnSOFT and Autron shares based on a ratio of 1:0.96:0.12 each. This means one MnSOFT share is equivalent to 0.96 AutoEver shares, and one Autron share amounts to 0.12 AutoEver shares.

MnSOFT shareholders claim this swap ratio is unfair for AutoEver, in which Hyundai Motor Chairman Chung Euisun directly holds a 9.6 percent stake to stand as the fourth-largest shareholder. AutoEver is a listed firm, while MnSOFT and Autron are unlisted. Their shares are traded on the over-the-counter (OTC) market.

“MnSOFT's capital per share is 50,404 won currently, which is double the 25,836 won for AutoEver,” the statement read. “Also, the average market price of MnSOFT shares in the past three months was 122,608 won, while that of AutoEver was 78,046, meaning MnSOFT's price was 1.6 times higher than AutoEver's.”

Given these, MnSOFT shareholders claim they should get at least 1.6 AutoEver shares per MnSOFT share, but Hyundai acknowledged MnSOFT as an unlisted firm having no share price accepted on the market, thus set the rate at 1:0.96. This values each AutoEver share at 92,000 won and MnSOFT share at 88,000. The rate was set by accounting firm EY Hanyoung.

According to 38 Communications, however, MnSOFT's highest share price in the past 52 weeks was 146,500 won, and shareholders are now trading it at 102,500 won. The shareholders argue the swap ratio should reflect this price, citing the Financial Services Commission (FSC) guideline to reflect objective share trade cases in valuing unlisted firm's shares.

The shareholders also claim that the accounting firm has set the swap ratio when AutoEver's share price was at its peak. AutoEver's share price rose sharply in the fourth quarter of 2020, rising from 67,200 won on Oct. 5 to 123,500 won on Dec. 30. It is a sharp increase given the price was 21,800 won on March 19.

MnSOFT shareholders are staging heated debates on whether or not to file compensation suits against Hyundai, while some were raising questions on whether the price set by the firm can be recognized as a proper transaction record.

Regardless of their opposition, the merger plan is expected to be approved at the upcoming shareholders meeting because Hyundai Motor and Hyundai Mobis hold respective stakes of 31.84 percent and 25.67 percent in MnSOFT. There are 908 minor shareholders of the company and their combined stake is 34.75 percent.

However, industry officials said the group can't ignore minor shareholders' opposition as it could dent Chairman Chung's pledge to improve shareholder value. In 2018, Hyundai Motor has withdrawn its plan of a Hyundai Mobis spinoff and Hyundai Glovis on minor shareholders' opposition on the stock swap ratio. Over the withdrawal, Chung has promised that the group will employ policies friendlier to shareholders.