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Hyundai Group likely to be broken
up
SEOUL - Hyundai Group, one of
South Korea's largest conglomerates, is likely to be
broken up and merged into one of its satellite
companies, KCC Group, industry watchers said on Friday.
Kumgang Korea Chemical Co (KCC), the flagship of
the KCC Group, declared that group founder Chung
Sang-yung and group affiliates have secretly secured a
44.39 percent stake in Hyundai Elevator Co, the de facto
holding company of Hyundai Group.
Emerging
victorious from a months-long battle for control of
Hyundai Group, KCC said its actual stake in Hyundai
Elevator, if assisted by friendly forces, including the
brothers of the late Hyundai Group founder Chung
Ju-yung, would top 50 percent.
KCC founder
Chung, who is the youngest brother of the late Hyundai
Group founder, and KCC affiliates have also increased
their stake in Hyundai Merchant Marine, another main
pillar of the Hyundai Group, by 3.95 percent over the
past month to 6.93 percent.
Current fair-trade
laws set the minimum equity holdings for affiliation of
other business concerns at 30 percent.
In light
of KCC's declared intent to take control of Hyundai
Group, all of the conglomerate's affiliates, including
Hyundai Elevator, Hyundai Merchant Marine, Hyundai
Logistics Co, Hyundai Asan and Hyundai Securities, will
soon be incorporated into the KCC Group.
Hyundai
Elevator is the largest shareholder of Hyundai Merchant
Marine with a 15.2 percent stake and the second largest
shareholder in Hyundai Logistics with 18.7 percent
stake. In turn, Hyundai Merchant Marine is the largest
shareholder in Hyundai Securities with a 17 percent
stake and holds 40 percent of Hyundai Asan, 30 percent
of Hyundai Logistics and 6 percent of Hyundai Corp.
Together with its four affiliates in
construction, auto parts and information-technology (IT)
businesses, KCC forms South Korea's 37th-largest
conglomerate, with aggregate assets of 2.67 trillion won
(US$2.26 billion).
Hyundai Group, with combined
assets of 10.1 trillion won, currently ranks as Korea's
19th-largest conglomerate. The affiliation of Hyundai
Group would lift KCC's conglomerate ranking to 18th.
In addition to the chaebol rankings, a
KCC-controlled Hyundai Group is likely to undergo
sweeping changes in its business portfolio and
management. First of all, KCC made clear its intention
to terminate Hyundai's involvement in loss-making North
Korean businesses.
"In principle, KCC will lead
Hyundai to withdraw from all unprofitable businesses,
including the North Korean business involving Hyundai
Merchant Marine and Hyundai Asan," said Chung Jong-soon,
senior executive vice president of KCC. In this regard,
another KCC official said KCC is too financially weak to
turn around Hyundai's North Korean business, suggesting
plans to spin off Hyundai Asan.
On the other
hand, KCC's surprise announcement signals an end to the
family dispute over the control of Hyundai Group, with
the family of Hyun Jung-eun, the wife of the late
Hyundai Group chairman Chung Mong-hun, claiming merely
19.43 percent in Hyundai Elevator.
Since the
suicide of Chung Mong-hun in early August, his family
members have been mired in a dispute over the control of
the struggling conglomerate. The family conflict was
triggered by the inauguration of Hyun Jeong-eun as the
chairwoman of Hyundai Elevator on October 21. The KCC
vice president said it will not consider replacing Hyun
for the time being. But he made clear that Hyun's
boundary will be restricted to Hyundai Elevator.
KCC's bid to take over Hyundai Group may run
into trouble as the watchdog Financial Supervisory
Service said the KCC founder could forfeit voting rights
for as much as 20.69 percent of his stake in Hyundai
Elevator because of alleged violations of the stock
transaction laws. The FSS said it will launch probes
into whether KCC and its founder have violated
securities trading law in increasing their stakes in
Hyundai Elevator to over 30 percent through a private
investment fund.
Furthermore, the KCC founder
may step into a moral controversy, as he stocked up on
Hyundai Group shares with promises to shield the
conglomerate from hostile corporate hunters. But the KCC
founder himself is now criticized as a mastermind of
KCC's "hostile" takeover of Hyundai Group.
Chung
purchased the interest in Hyundai Group's virtual
holding company through a private investment fund on
November 4.
"Chung is suspected of breaking the
5-percent rule," the FSS said.
The rule
stipulates that shareholders with a stake of 5 percent
or more in a company must make public that fact within
five business days of the time their interests exceed
the limit.
The watchdog also said the issue of
restricting the voting rights of Chung's stake in
Hyundai Elevator is not within the FSS's jurisdiction.
"The two sides should resolve the issue in
court," an FSS official said.
The watchdog also
said it will investigate whether Korea Flange, which
holds a 27.3 percent stake in Hyundai Elevator, violated
a disclosure rule. KCC and Chung had disclosed the
recent purchase of a 7.81 percent interest in Hyundai
Elevator through Korea Flange.
(Asia
Pulse/Yonhap)
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