Hyundai Motor heir's share purchase boost succession

By Park Jin-hai

Chung Eui-sun Hyundai Motor Vice Chairman

The Hyundai Motor heir apparent’s recent move to purchase Hyundai Motor shares owned by its affiliate Hyundai Heavy Industries could be a signal of corporate governance restructuring linked to its succession plan, experts said.

“It is highly likely that the move can be read in the context of corporate governance. As it followed the Hyundai Mobis purchase of its own shares a day earlier, the timing signals that the corporate governance restructuring may have kicked off,” said Lim Eun-young, an analyst at Samsung Securities.

Hyundai Motor Vice Chairman Chung Eui-sun spent nearly 500 billion won ($419.3 million) to purchase 3.16 million Hyundai Motor shares from Hyundai Heavy in after-hour trading on Wednesday.

With the purchase this time, Chung’s stake in Hyundai Motor has been jacked up to 1.44 percent, from almost nothing.

Chung previously had only a 1.75 percent stake in Kia Motors and 31.88 percent of Hyundai Glovis shares, which has little influence on the corporate governance structure.

His father, Chairman Chung Mong-koo, owns a 5.2 percent stake in Hyundai Motor.

Lee Sang-hyun, an analyst at IBK Investment & Securities, said, “Although the single movement may not be a telltale sign of what has been going on, given the previous cases of other corporate moves, the recent movement could be a meaningful lead. The purchase gives a strong impression that the process to cut the cross sharing structure of the company and make junior Chung’s control over the group is in works,” the analyst said.

“Previously, people wrote many scenarios putting Hyundai Mobis at the center of the corporate structure, but we cannot rule out Hyundai Motor or two of them together will take the center stage. With Chung’s purchase we now have another option in the succession scenario,” he added.

Most analysts said the purchase will work positively on Hyundai and Glovis share prices.

“In the past, when Chung purchased Kia and Hyundai Wia stakes, their share prices jumped. At a time when Hyundai will realize a positive side effect from the Volkswagen scandal, and Chung’s purchase this time, Hyundai Motor shares will add to its value,” Lim said.

Hyundai Motor Group has a cross shareholding structure where Hyundai Mobis sits at the top because it owns a stake in Hyundai Motor, which in turn controls Kia Motors Co., who completes the cyclical ownership by owning a portion of Hyundai Mobis.

In commenting on Chung’s purchase, a company spokesman said, “It was so the Hyundai Motor shares would not land in the wrong hands, where the stable corporate management could be put on risk. It has been done to protect the shareholder value, which could be hurt if share prices fall after a block of shares enter the market.”