Park Jin-hai primarily focuses on K-dramas, entertainment shows and actor interviews. Beyond that, she also pens articles covering the broader arts scene, with a particular emphasis on classical music, dance and various aspects of lifestyle. Since joining The Korea Times in 2013, she has made significant contributions in the realms of hallyu (Korean wave), industry news and international affairs.
Hankook Tire decides to buy 19.5% of Halla Visteon
By Park Jin-hai
Leading local tire maker Hankook Tire has decided to buy a 19.49 percent stake in Halla Visteon Climate Control Corp. (HVCC) for 1.08 trillion won from Visteon Corp., the company said Friday.
Meanwhile, a local private equity fund, Hahn & Company, will buy a 50.5 percent stake in HVCC.
Through the stock purchase agreement, Hankook Tire has become the second-largest shareholder of HVCC, the world's second-biggest producer of air-conditioning and heating systems for vehicles.
The U.S. automotive parts supplier Visteon Corp., HVCC’s biggest shareholder, has put its 69.99 percent stake in HVCC on the market, worth 3.9 trillion won.
Hankook Tire has also secured the preemption right, so when HVCC’s largest stakeholder Hahn & Company resells the shares, it will have the right to acquire those shares ahead of other competitors.
The deal will be completed in the first half of next year after the approval of the relevant authority and shareholders.
The tire maker has long been interested in mergers and acquisitions as a way of expanding its tire business. The company predicts the acquisition of HVCC will give it substantial synergy based on HVCC’s business network with car manufacturers.
“We decided to participate in the HVCC’s stake acquisition, since HVCC’s customer base is similar to ours and it has a stable financial structure,” said Suh Seung-hwa, vice chairman and CEO of Hankook Tire.
“Given the future synergic effects the tire and car parts business will entail, we expect our brand value to be further enhanced. We also open the option to acquire HVCC’s stake additionally,” he added.
The market has viewed the purchase positively. “Both companies are dealing with automakers and their products have relatively high negotiation powers. When Hankook Tire gains HVCC’s ownership in the future, it will become a total parts company with an upper hand in price negotiations,” said Koh Tae-bong, an analyst at HI Investment and Securities.
If the company gains HVCC’s ownership, it will become a giant car parts manufacturer with total annual sales of 12 trillion won.
However, Hyundai Motor and Kia Motors, HVCC's two biggest customers in Korea, are uneasy with the deal because of Hahn & Company's involvement.
"Even though a local tire manufacture participated in the deal, the fact that its biggest stakeholder is a private equity fund remains unchanged. We are still opposed to the idea of profit-minded private equity fund acquiring an HVCC stake,” said a Hyundai official. “It will lead to the significant cut-down on the R&D investment, weakening our competitiveness, as well as theirs.”
More than 50 percent of HVCC-made vehicle air conditioners and heaters are supplied to Hyundai and Kia Motors. Hyundai, Kia and Mobis account for 21.2 percent, 10 percent and 21.4 percent of HVCC’s annual sales, respectively.
Hyundai Motor Group has been considering various options to diversify its supply chains of automotive climate control systems, including the acquisition of the smaller Doowon Climate Control, which supplies climate control systems to Hyundai.