By Kim Da-ye
Hyundai Group is facing another obstacle in its attempt to take over Hyundai Engineering & Construction (E&C) as former employees of the builder have joined forces to seemingly thwart the group’s bid.
A group of former employees and executives of Hyundai Engineering and Construction put an advertisement on the front page of major newspapers Tuesday that is largely interpreted as being against the acquisition of the construction firm by Hyundai Group.
Hyundai Gunwoohoe, an association of the builder’s former executives and employees chaired by former procurement chief Kim Joo-yong, and about 1,000 employees, voiced in the ad their concerns that the bidding is becoming too intense and might lead to the insolvency of both the potential buyer and Hyundai Construction.
Though the advertisement did not name any companies, some phrases were directed at the Hyundai Group.
“We urge [the involved parties] to refrain from the emotional battle of public opinion in which malign advertisements that fuel the overly heated bidding war are rampant,” the association announced in the advertisement. “We also strongly urge them to refrain from damaging the honor of the late Chairman Chung Ju-yung by using him for publicity.”
Hyundai Group has placed a series of advertisements against the bidding by the Hyundai-Kia Automotive Group in both the press and on television. One emotional TV ad carried a black and white photo of Chung Ju-yung and the late Hyundai Group Chairman Chung Mong-hun in safety hats in order to show that Hyundai Group is the original owner of the construction firm.
The rest of the messages in the association’s advertisement were less direct, but suggestive.
The association emphasized the ability and capacity to manage and nurture Hyundai Construction. “The potential buyer should be equipped with everything ― the capacity to invest, the will to foster and the ability to manage,” said the statement.
It was particularly concerned that Hyundai Construction might fall into insolvency again if the buyer does not have enough capital.
“The recent merger and acquisition failures show that if a company without enough capital acquires Hyundai Construction, it will become insolvent due to too much borrowing and efforts to satisfy the rights of the investor partners. That can lead to Hyundai Construction’s capital drying up and both firms becoming insolvent.”
The Hyundai-Kia Automotive Group is currently the country’s second largest conglomerate with its assets valued at about 100.7 trillion won that compares to the very small 12.4 trillion won of Hyundai Group. The automaker has come up with about 4.5 trillion won for the bid while Hyundai Group managed to accumulate 1.5 trillion won.
The acquisition of Hyundai Construction ― buying its 34.88 percent stake held by nine creditors led by the Korea Exchange Bank ― is expected to be priced between 3 and 4 trillion won. The formal bids are due Nov. 12.
Furthermore, the former employers demanded that Hyundai Construction’s technologies including those for building a nuclear plant shouldn’t be leaked to foreign entities. “Hyundai Construction’ and the country’s future investment sources shouldn’t flow abroad because of the speculative foreign capital,” said the advertisement.
Hyundai Group is planning to put in a joint bid with the German Engineering firm M+W Group.
Hyundai Construction’s labor union made a separate advertisement on the same day that carried a subtler tone than that of the Hyundai Gunwoohoe. The labor union’s ad focused on the possible negative outcomes that the fierce bidding war will cause.
“The creditors are only interested in the highest bidding price, not in the future of the company. It has publicly talked about how it would sell the company at a high price,” the labor union announced in the advertisement, adding that the high price paid for the acquisition can affect the potential buyer’s finances, damage its competency and cause it to become insolvent.
“An M&A can turn into poison, not nutrients, that returns like a boomerang and put us all in trouble,” said the advertisement.
An official of Hyundai-Kia Automotive told The Korea Times that, “We fully understand the concerns of the present and former employees of Hyundai Engineering & Construction.”