By Nam Hyun-woo
Hyundai Motor Group took the first step Wednesday to streamline its complex ownership structure by making its auto parts unit, Hyundai Mobis, its control tower.
Hyundai Mobis held a board meeting to approve the plan to spin-off its module manufacturing and after-sales parts businesses and merge those businesses with Hyundai Glovis, the group's logistics unit.
Under the proposed plan, Mobis shareholders will receive 0.61 of a new share of Glovis stock for each share of Mobis.
According to the group, Mobis will then focus the core function of the group's future, such as auto piloting, as well as acting as the control tower of the group. Glovis, will seek to add new revenue streams by combining Mobis' module manufacturing and after-sales parts businesses.
Mobis stands as the key affiliate of the group's four circular ownership structures. Of those structures, the core is Mobis that owns a 20.78 percent stake in Hyundai Motor. Hyundai Motor having a 33.88 percent stake in Kia Motors, and Kia Motors having a 16.88 percent stake in Mobis is the leading shareholder.
Through this structure, Hyundai Motor Group Chairman Chung Mong-koo and Vice Chairman Chung Eui-sun could control the affiliates even with small stakes in key Hyundai affiliates. Currently, Chairman Chung holds a 6.96 percent stake in Mobis, while Eui-sun does not have stake.
To end this circular structure, the group said the board of directors of Kia Motors and Glovis has decided to sell its respective stakes in Mobis to “the principal shareholders,” which means the chairman and vice chairman.
The chairman and vice chairman will sell all of their stakes in Glovis to Kia Motors to secure funds for purchasing Mobis stakes. The chairman holds a 6.7 percent stake in Glovis and the vice chairman has 23.2 percent.
This will make Mobis stand right below the chairman's and vice chairman's control. Mobis will then control Hyundai Motor company, which controls Kia Motors.
The spin-off-merger is subject to approval at the general shareholders' meetings of Mobis and Glovis, currently scheduled for May 29. Upon approval, the spin-off-merger is expected to be effective in early July.
The plans came after the country's Fair Trade Commission issued a series of “requests” to the group to have a plan to overhaul its complicated shareholding structure among affiliates by the end of March.
“The group's commitment towards a more transparent and accountable governance structure will eventually benefit all stakeholders, including shareholders, employees, regulators and customers,” the group said in an English statement. “The completion of these transactions will also effectively unwind the Group's circular shareholding structure.”