Innocean listing to speed up Chung's succession

By Kim Jae-won

Innocean, an advertising affiliate of Hyundai Motor Group, will list its shares on the main bourse next month, which is part of the management succession from its Chairman Chung Mong-koo to his son, Vice Chairman Eui-sun.

Among the 20 million shares to be listed, 5 million will be offered to the public. Of the 5 million initial public offering (IPO) shares, 40 percent will be new shares and the rest will come from those held by existing major shareholders.

Analysts said that the group’s vice chairman seeks to accumulate cash in preparation for the succession of the nation’s biggest automaker. They said the IPO will benefit Chung Eui-sun, who owns a 10 percent stake in the advertising company.

Market watchers say his shares will be worth around 120 billion won if the company’s IPO proceeds smoothly.

In the IPO, each share will be offered for between 64,000 won and 71,000 won. Last month, Innocean passed the Korea Exchange (KRX) examination required for the listing.

The IPO announcement came a few months after Chung sold his 8.49-percent stake in Hyundai Glovis, the group’s logistics affiliate. Observers said he unloaded the stake to accumulate more cash for the purchase of a key stake of the group.

Hyundai Motor said that the move aims to cut the owner family members’ stake in the company to comply with the fair trade regulation which bans affiliates of a group from giving excessive orders to their sister companies run by the owner family.

The regulation prohibits the owner family from having more than a 30 percent stake in a listed affiliate which gets orders from the group’s subsidiaries worth more than 20 billion won, or 12 percent of revenues. If the company violates the regulation, it is subject to fines.

Chung Sung-yi, a daughter of Chung Mong-koo, is the largest shareholder of Innocean, owning a 40-percent stake in the company, according to the KRX. Three key stakeholders, Chung Sung-yi, Chung Eui-sun and the Chung Mong-Koo Foundation, own a combined 60-percent stake in the company.

Innocean posted 395.2 billion won in revenue and 55.1 billion won in net profit last year, according to the bourse operator. Many of Innocean’s clients are fellow Hyundai Motor Group affiliates, including Hyundai Motor and Kia Motors.

After the listing, Vice Chairman Chung plans to hold a 2 percent stake in Innocean, with Chung Sung-yi’s stake falling to 28 percent.

Meanwhile, Nomura increased its target price for Glovis shares by 19 percent to 310,000 won, saying Hyundai Motor Group may merge Hyundai Glovis and Hyundai Mobis to help Chung’s succession without a high tax burden.

“We think a Mobis-Glovis merger is most likely, as it allows the son, E.S. Chung, to transfer his Glovis holdings to Mobis without incurring a heavy capital gain tax. We think a simple share swap between the son and Kia is unlikely, owing to the tax burden and cost involved in buying/selling affiliate companies,” Nomura analysts Angela Hong and Choi Jae-hyung said in a report.

The company’s market capitalization is expected to reach 1.4 trillion won after the listing.