By Kim Rahn
Hyundai Motor Group’s two construction affiliates, Hyundai Amco and Hyundai Engineering, will be merged into a single entity on April 1, according to the firms, Thursday.
The merger is expected to reshape the construction and engineering industry, as the entity that will be a new, competitive player in the market.
The companies said their respective boards decided on the merger during respective meetings.
Hyundai Engineering will take over Hyundai Amco, as the former’s stock price is higher than the latter’s and it has twice as many workers. The two firms are unlisted.
Hyundai Amco was set up in 2002 for construction and expansion of the group’s manufacturing facilities and research institutes. It ranked 13th among construction firms here in construction capacity.
Hyundai Engineering is a subsidiary of Hyundai Engineering and Construction (E&C), which holds a 75-percent stake in the former. It specializes in plant construction.
“The merger is part of the group’s strategy to expand its construction business,” a group official said.
“By developing more competitiveness and expertise in plant construction, we aim to make the single entity one of the world’s top 10 engineering companies by 2025, with 20 trillion won in sales,” he said.
The combined sales of the two firms were 6 trillion won last year, and the combined assets were 4 trillion won. The new entity will rank 10th in terms of construction capacity and eighth in terms of sales, according to the official.
Industry watchers say the merger will create a considerable synergy as the two firms have specialties in different businesses ― while Hyundai Amco focuses on construction of buildings, roads, ports and houses, Hyundai Engineering is good at planning and constructing petrochemical and electric power plants.
“Through the merger, the single company will have a diverse portfolio ranging from industrial plants to housing and civil engineering. It will have an advantage in winning construction bids in both domestic and overseas projects with a combination of Hyundai Engineering’s planning capacity and Amco’s construction ability,” he said.
The new firm’s business will be expanded to oil and gas plant construction, the group said, adding Hyundai E&C’s business in the field may be transferred to the new company.
Some market watchers suspect the merger may be a step for the group Vice Chairman Chung Eui-sun to expand control over the group, considering he is the largest shareholder of Hyundai Amco with a 25-percent stake. The forecast is that the group may list the new entity.
Others say the merger will bring about more mergers and acquisitions among construction firms with domestic or foreign companies.