Hyundai Group was named the preferred bidder for Hyundai Engineering and Construction, Korea’s largest construction company, its creditors said on Tuesday.
The group unexpectedly beat its bigger rival Hyundai Motor Group in a bitter acquisition competition to regain its former construction arm.
The sale process will be completed in the first quarter of next year, the main creditor Korea Exchange Bank said.
Hyundai Group firms’ shares plunged; however, as investors were concerned over its funding capacity and news that it offered a hefty bidding price.
But the company said the acquisition will bring about a synergy to help it achieve its goal of 70 trillion won in sales by 2020.
“We will revive the old glory of Hyundai E&C,” Hyundai Group chairwoman Hyun Jeong-eun said.
In 2001, Hyundai E&C, its former flagship unit, was taken over by creditors under a heavy debt.
Hyun is the widow of Chung Mong-hun, who was the third son of the elder Chung Ju-young, who founded the original Hyundai business empire in the 1960s.
The conglomerate was divided in a bitter family feud a decade ago. Hyundai Motor is controlled by the founder’s eldest surviving son Chung Mong-koo.
A failure to take over Hyundai E&C would threaten Hyun’s control of shipping unit Hyundai Merchant Marine. Hyundai Engineering &Construction Group has about 8.3 percent stake in the company.
Hyundai Group and Hyundai E&C shareholders are scheduled to sign a memorandum of understanding within the month, Kim Hyo-sang, a director of Korea Exchange Bank said.
“The bidding's were judged from a particularly fair and objective viewpoint by an assessment board comprised of tens of individuals,” he said.
“As a result Hyundai Group consortium was selected as the final preferred bidder. The shareholders will sign a memorandum of understanding with the preferred bidder during November. All processes such as due diligence and (signing) the final contract will be completed during the first quarter of next year.”
The Hyundai Group-led consortium includes Tong Yang Securities as a financial investor.
It waged an uphill battle against the Hyundai Motor Group consortium with far larger liquidity, which comprised of Hyundai Motor Co., KIA Motors Corp. and Hyundai Mobis Co.
Hyundai E&C creditors will hand over 34.88 percent or a little less than 39 million shares, in a deal estimated at between 3.5 trillion and 4 trillion won.
Hyundai Motor Group is said to have bid around 4.3 trillion won ($3.8 billion) for the builder. Estimates on Hyundai Group’s bid ranges from 4.8 trillion won to 5.5 trillion won. Neither side unveiled the value of the deal.
Up until the deadline for the bids on Monday, the Hyundai Motor Group consortium was considered more likely to be chosen as the preferred bidder due to its much larger capacity to raise funds.
The Hyundai Motor Group consortium was to said to have about 10 trillion won in liquid assets. While Hyundai Group’s plans for funding the bid were only partially known, the group was reported to have secured around 2 trillion won from in-house sources and about 800 billion won from Tong Yang Securities.
Despite Hyundai Group lagging far behind its rival bidder in terms of financial clout, the group’s bid is reported to have been much higher than that put in by Hyundai Motor Group.
By Choi He-suk (email@example.com)