Schindler opposes Hyundai Elevator's new share issues
By Park Si-soo
Chairwoman Hyun Jeong-eun
Schindler Holdings, the second-largest shareholder of Hyundai Elevator, said Tuesday it opposes the elevator maker’s plan to issue new shares, arguing that it will damage Hyundai’s corporate and shareholders’ value.
The statement came about one month after the nation’s biggest lift maker endorsed a plan to raise 264.5 billion won ($236.1 million) by issuing new shares to existing shareholders during a board meeting in April, the fifth rights issue since 2011.
It said it will use the raised money as operating funds.
Back then, Schindler said it would boycott the plan for the sake of shareholders’ interest.
“In the past four years, Hyundai Elevator recorded operating profits and generated operating cash flows of more than 300 billion won. In view of continued positive expectations for Hyundai Elevator’s business in 2015, the cash balance can be expected to remain healthy, even if the total debt due within one year were repaid,” Schindler said in a statement, Tuesday.
“Besides debt repayment, Hyundai Elevator mentions two other purposes of the planned capital increase: the purchase of raw material and outsourcing cost, and funds to be earmarked for investments in its Shanghai subsidiary. Both are not credible since the current cash balance and positive operating cash flow should by far be sufficient to cover those costs too.”
Schindler said it fears that funds generated from the rights issue might be used for financing affiliates not related to Hyundai Elevator’s core business.
Schindler holds a 21 percent stake in Hyundai Elevator, while Hyundai Group Chairwoman Hyun Jeong-eun and her alliances hold a combined 40 percent stake.
Hyundai expressed regret for Schindler’s move, saying its concerns are baseless.
“We will use the raised capital to purchase raw materials and cover outsourcing costs. There is nothing to be misused,” a Hyundai spokesman said. “We wonder why Schindler stands in the way of the plan that will benefit both sides.”
The two companies are also embroiled in a legal battle. Schindler sued Hyundai Elevator for inflicting financial damage by raising capital through another public offering, which was designed to make up for the losses from derivative contracts to save its affiliate Hyundai Merchant Marine, when the marine arm’s stock price fell.