Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Hyundai Glovis in spotlight under Chairman Chung Euisun
Seen above is Hyundai Glovis' Glovis Crown car carrier vessel stationed in Bremerhaven, Germany. Courtesy of Hyundai Glovis
By Nam Hyun-woo
By Nam Hyun-woo
Hyundai Motor Group Chairman Chung Euisun / Yonhap
Hyundai Motor Group's logistics unit, Hyundai Glovis, is playing a greater role in the businesses of the car conglomerate, which entered a new chapter by appointing Chung Euisun as chairman.
Hyundai Glovis' role has been mainly shipping and delivery of Hyundai Motor and Kia Motors vehicles. Under Chung's leadership, however, the company is expanding its portfolio to cover not only logistics but also batteries for electric vehicles (EVs) and hydrogen for fuel-cell EVs, which will constitute the core of the group's operations down the road.
Industry officials said this appears to be aimed at improving the value of Chung's controlling stake in Hyundai Glovis, and consequently using it as a cash source for the chairman to increase his stake in Hyundai Mobis, which now stands as the controlling firm of the group, and prevent potential influence from hostile funds.
During its conference call for the third quarter on Oct. 23, Hyundai Glovis said it is “preparing for new businesses including hydrogen and EV batteries.” According to the company's plans, it will be in charge of the non-manufacturing side of the group's EV and fuel-cell EV businesses.
The company said it will operate hydrogen carriers for maritime shipping and tube trailers for land logistics of hydrogen. For EV batteries, the company will run charging station networks, battery rental and recycling services.
For these goals, the company has been enhancing its ties with big name partners.
Last month, Hyundai Glovis announced that a liquefied hydrogen carrier blueprint that it had developed with Korea Shipbuilding & Offshore Engineering and Hyundai Mipo Dockyard has received approval in principle in Korea and Liberia. Prior to this, the company signed an MOU with Norwegian shipping group Wilh. Wilhelmsen Holdings ASA on joint efforts for shipping eco-friendly energy resources such as liquefied natural gas and hydrogen.
For EV batteries, Hyundai Glovis has teamed up with battery maker LG Chem and taxi operator KST Mobility. Hyundai Glovis will rent out EV batteries to KST Mobility, and LG Chem will collect the batteries after two to three years of use and repurpose them into energy storage systems (ESS).
As Hyundai Glovis makes aggressive moves in new business, investors are betting high on the expectations on the company's business and its increased role in the group as Chung becomes the new group chairman on Oct. 14. Chung is the largest stakeholder in Hyundai Glovis with a 23.29 percent stake.
Hyundai Glovis' share price climbed 14.72 percent from 146,000 won on Sept. 1 to 167,000 won on Oct. 30. When Chung's appointment was first reported on Oct. 13, the price spiked by 10 percent and showed another 14.33 percent increase on Oct. 20 to close at 200,500 won.
“Hyundai Glovis' share price soared recently on expectations for changes in Hyundai Motor Group's shareholding structure following Chung's appointment and Glovis' active participation in the group's hydrogen and EV businesses,” Daishin Securities analyst Yang Ji-hwan said.
Currently, Hyundai Motor Group has four complex cross-shareholding loops, and Hyundai Mobis is serving as a de facto holding firm in those loops. To effectively control Hyundai Motor Group, Chung needs to increase his stakes in Hyundai Mobis, but he only has a 0.32 percent stake in the company.
To break those loops, the group proposed a plan in March 2018 to spin off Hyundai Mobis' module and after-service divisions and merge them with Hyundai Glovis by swapping stocks. This was anticipated to improve Hyundai Glovis' market value, thus providing resources for Chung to increase his stake in Hyundai Mobis.
However, this faced strong opposition from Elliott and a number of other investors that questioned the stake swap ratio and shareholder return policies in the proposed process. Hyundai Motor Group withdrew the plan, with Chung saying in a statement that “the group will fully reflect the views and advice of relevant parties next time.”
As Chung becomes the new chairman, multiple scenarios are emerging again. Of them, one of the most mentioned is listing spun-off Hyundai Mobis before merging with Hyundai Glovis through a stock swap. Other scenarios such as rights issuing of Hyundai Mobis are also raised, but analysts said the first step of all those scenarios is the improved value of Hyundai Glovis shares.
“No matter which way Hyundai choose, Glovis' improved value is advantageous for the group's owner (Chung),” Meritz Securities analyst Kim Joon-sung said.
Kim added the looming regulations on conglomerate owners' profit-taking is also spurring expectations for an overhaul of Hyundai Motor Group's shareholding structure.
The government has proposed for the National Assembly to approve a revision on the Fair Trade Act, placing a 20 percent cap on owner families' stakes in a company benefiting from inter-affiliate trading. Currently, the cap is 30 percent for listed company, but the revision will tighten it to 20 percent.
So far, Chung and his father, former Chairman Chung Mong-koo, are holding a combined 29.9 percent stake in Hyundai Glovis in order to meet the current regulation level. If the revision passes the Assembly, they will have to sell nearly a 10 percent stake in Glovis within two years, thus the stake will likely be used to foot costs of the group's shareholding structure overhaul.
“We believe the appropriateness of a shareholding structure overhaul has heightened, given the changes in circumstances surrounding the group,” Kim said.