Schindler may seek Hyundai takeover


Hyun Jeong-eun Hyundai Group Chairwoman	Alfred Schindler Schindler Holdings Chairman

By Kim Rahn

Schindler Holding AG, a Swiss elevator-maker, has been under fire for its ambivalent attitude toward Hyundai Elevator.

Schindler has stressed the importance of protecting shareholders' values, but it has opposed a recent capital increase plan by Hyundai to improve its bottom line, which the Korean firm claims is shaking its business performance and stock prices.

The elevator unit of Hyundai Group said a series of recent acts by the Swiss company and its chairman's remarks on the elevator unit are aimed at dropping Hyundai Elevator's stock prices and thus setting the stage for a takeover of the company.

Hyundai's claim came after Chairman Alfred Schindler said in a conference call on Friday that he will decide what action to take about Schindler's 30.89-percent stake in the elevator unit of Hyundai Group after the elevator arm and the group's 2013 performance comes out.

Schindler has claimed that Hyundai Elevator executives, including Hyundai Group Chairwoman Hyun Jeong-eun, inflicted losses on the elevator unit through derivative contracts in which Hyundai Elevator agreed to support the group's merchant marine affiliate when the marine firm's stock price falls.

But the chairman said he was aware of the group's complicated cross-ownership structure and the contracts when buying stakes in the elevator unit in 2006 and 2010.

He said he thought the issue might be settled if Hyundai Elevator spins off the elevator business and sets up a joint venture with Schindler as agreed in a letter of intent (LOI) signed in 2004.

However, Hyundai Elevator said the LOI was dismissed in 2005 through mutual agreement, and since then it has told Schindler that there would be no spinoff or selling of the elevator business.

"Schindler remained silent when the shipping business was flourishing and the marine unit's stock price hike brought valuation gains to the elevator unit through 2010. It began opposing the derivative contracts when the marine unit saw losses due to a slump in the shipping industry, saying they did not expect that and blaming Hyundai Elevator executives," the elevator firm said in a statement.

It also denounced Schindler's earlier announcement not to participate in Hyundai Elevator's capital increase, saying the announcement might affect other shareholders' decisions. Schindler claimed the capital will be used for supporting the marine unit, not for the elevator arm's own interest.

The chairman said his firm may not sell its stake in Hyundai Elevator and leave, as the selling might drop the stock price and damage minor shareholders. He said his company may write off its losses and wait, as the global shipping business can improve or there can be moves by creditor banks or financial regulators to force Hyundai to undergo restructuring _ a move which may force the group to sell the elevator unit.

Hyundai Elevator said Schindler has led the elevator unit's stock price decline by making public its nonparticipation in the capital increase and possible stake-selling. The company's stock price was 53,155 won on Nov. 11 but plunged by 26 percent to 39,050 won Tuesday. It dropped sharply from 46,250 won in a week since Feb. 3 when Schindler announced its nonparticipation in the capital increase.

"These acts show Schindler is not only pressuring Hyundai Elevator's executives but also attempting to pressure minor shareholders and financial regulators, as well as causing confusion in the market," the firm said.

"The conference call was a show full of excuses, sophistry and lies, which the chairman organized before Schindler's board meeting to avoid responsibility as his M&A attempt is not making progress and is causing losses," it said.

A Hyundai Elevator official said the company is considering taking action against Schindler's exaggerations and distortions of fact.

"Some of its false claims can affect Hyundai Elevator's stock price. We are reviewing whether it is against the law," he said.

A public relations agency representing Schindler here said the most important thing for Hyundai is to present its plan on how to recover the elevator unit's profits.

"From Hyundai Elevator's perspective, Chairwoman Hyun inflicted losses to the company through the derivative contracts favorable to a separate entity, the marine arm. She should clarify what she and the company can do to minimize damage on Hyundai Elevator and normalize its business," Yvonne Park, managing director at Fleishman Hillard, said.

She said it is not against the law for a major shareholder to announce whether or not it plans to participate in capital increase before the share-sale begins.

"Hyundai claims Schindler intends to drop the elevator unit's stock price. But if the price falls, Schindler, the second-largest shareholder, will suffer financial losses. Why would it want to drop the price?" Park said.