Will there be grand compromise?
Hyundai Motor set to take on HE&C; Hyundai Group mulls legal action
By Kim Tae-gyu
A conflict involving three Hyundai’s ― Hyundai Group, Hyundai-Kia Automotive Group and Hyundai Engineering & Construction (HE&C) ― is expected to be protracted as creditors deprived Hyundai Group of its preferred bidder status this week.
According to experts, the chances are that the creditors headed by the Korea Exchange Bank (KEB) will go ahead with negotiations with alternative bidder Hyundai Automotive.
Hyundai Group is not likely to sit idly by as Hyundai Automotive takes over the country’s largest builder as the latter came up with less money in the two-way bidding race.
Hyundai Group has already made it clear that it will take the case to court in order to get a 35-percent stake in HE&C, arguing the cancellation of the memorandum of understanding (MOU) was invalid.
``Creditors have lost fairness in the face of perverse insistence and threats by Hyundai Automotive Group, violating relevant laws and regulations. Disputes will rise on the unprecedented special favors given to Hyundai Automotive,’’ Hyundai Group said in a press release.
``Creditors will experience the strict judgment of the court for what they did. We hope the court will come up with fair and just decisions so that we will be able to regain the preferred bidder status.’’
Hyundai Group offered 5.51 trillion won for HE&C compared with Hyundai Automotive’s 5.1 trillion won to sign an MOU on the HE&C stake last month.
But some including Hyundai Automotive took issue with the funding plan of the Seoul-based group. A particular bone of contention was a 1.2 trillion won loan, which Hyundai Group claims came from Natixis.
Creditors asked Hyundai Group to present a copy of the loan contract involving Paris’ second-largest bank while the shipping-oriented group only submitted certificates from Natixis that the 1.2 trillion won was a legitimate loan on credit.
This prompted creditors to withdraw the MOU with Hyundai Group.
Win-win solution?
Creditors are apparently prepared to sell HE&C’s 8.3-percent stake in Hyundai Merchant Marine (HMM) to the group.
HMM, the country’s leading shipper is the flagship of the Hyundai Group, led by Hyun Jung-eun, the widow of Chung Mong-hun, the fifth son of the late Hyundai empire founder Chung Ju-yung.
If Hyundai Automotive, headed by her brother-in-law Chung Mong-koo, wins HE&C along with its significant stake on HMM in order to ally with his brother Chung Mong-joon, the major shareholder of Hyundai Heavy Industries that also has stakes in HMM, Hyun’s control of HMM might be at risk.
Hyun would not accept this because HMM is the holding company of her group, which also has under its wings Hyundai Securities, Hyundai Elevator and Hyundai Asan, the operator of the Gaesong Industrial Complex and the suspended Mt. Geumgang tours.
Analysts have pointed out that the 8.3-percent stake of HE&C is prodding Hyun to bet such a large amount of money and she may be happy to take the stake in question although she cannot get HE&C.
Hyundai Group flatly denied such an analysis while branding the proposal as one that is not worth examining. Its rationale is it will not accept the suggestion as it can still take over HE&C through its legal action.
Hyun might take the alternative of securing the 8.3-percent stake because she would not swallow the idea of her brothers-in-law risking her managerial rights in the group headed by her late husband.
Analysts expect that if Hyun does not accept the creditors’ proposal, the acquisition of HE&C will be embroiled in long legal battle, which would be bad for all involved.