Hyundai Heavy Industries Co., the world’s largest shipbuilder, sold a 705 billion won ($617 million) stake in Hyundai Motor Co. (005380) after one of its units shelved a share-sale plan.
Hyundai Heavy sold 3.2 million shares of South Korea’s biggest carmaker at 220,000 won apiece, or 3.7 percent lower than yesterday’s closing price, according to data compiled by Bloomberg. The stake sale reduced Hyundai Heavy’s holding in Hyundai Motor to 2 percent, the shipbuilder said in a regulatory filing yesterday.
The disposal comes a month after Hyundai Oilbank Co., 91 percent owned by Hyundai Heavy, shelved its initial public offering plan, citing worsening economic conditions. Today’s sale brings Hyundai Heavy’s fundraising announced in the past week to more than 1.4 trillion won, and is its biggest divestment of an asset since the company went public in 1999, according to data compiled by Bloomberg.
“The failed attempt to list its subsidiary would have complicated Hyundai Heavy’s financial plans,” said Lee Jin Woo, a senior fund manager at Seoul-based KTB Asset Management Co., which oversees $7 billion in assets including Hyundai Motor stock. “I don’t think there is any reason to be concerned about Hyundai Motor’s shares, as the sale was purely for Hyundai Heavy’s operational purposes.”
The share sale is to improve its finances, Hyundai Heavy said in its statement yesterday, without elaboration. The company said earlier this month it won an order to build 10 mega-container vessels for $1.2 billion, the biggest new contract for such ships industrywide in a year.
Hyundai Heavy’s last purchase of Hyundai Motor shares was on Oct. 25, 2007, according to a regulatory filing. The company bought 3.3 million shares for 64,000 won apiece, which is 3.4 times cheaper than yesterday’s offering price.
Hyundai Motor fell 2.4 percent to 223,000 won at close of trading in Seoul, while the benchmark Kospi stock index rose 0.2 percent. Hyundai Heavy shares gained 0.9 percent to 238,500 won.
The shipbuilder’s operating profit, or sales minus the cost of goods sold and administrative expenses, is expected to drop 25 percent to 3.42 trillion won this year, according to 25 analyst estimates compiled by Bloomberg.
Hyundai Heavy’s former chairman and biggest single shareholder Chung Mong Joon is the younger brother of Chung Mong Koo, Hyundai Motor’s chairman. The two companies broke off from Hyundai Group when the aging father and founder named his fifth son, Chung Mong Hun, as his successor in 2000. Hyundai Motor separated that year, while Hyundai Heavy split off in 2002.
Citigroup Inc. managed the sale.
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