The Financial Supervisory Service on Tuesday expressed its intention to indirectly intervene in Hyundai Group’s planned takeover of Hyundai Engineering and Construction by probing several speculations.
Meanwhile, Hyundai Group, the preferred bidder for Hyundai E&C, said in a statement that it would file lawsuits against people who tried to hinder the acquisition by spreading groundless rumors.
“We are not in a position to directly intervene in the coming transactions between Hyundai Group and creditors of Hyundai E&C,” an FSS official said. “But we have the right to inspect financial soundness of financial firms which offered takeover funds to Hyundai Group.”
The financial watchdog is questioning the process under which the Tong Yang Securities ― despite its cash flow trouble ― provided Hyundai Group with 800 billion won ($714 million).
Furthermore, the FSS and the Korea Exchange are investigating into whether the group violated stock disclosure rules.
Hyundai Group has been suspected of choosing not to make public their borrowing funds from a French bank. If the fundraising is based on stock-collateralized loans, the group should have made a disclosure (before investors), according to Korea Exchange stipulations.
Concerning the speculations and the FSS’s move, Hyundai Group made it clear that it was considering legal proceedings.
The group mentioned the financial regulator, several figures of Hyundai E&C creditors, Hyundai Motor, and the union of Hyundai Securities, criticized them for issuing baseless rumors.
“The situation that the FSS is probing figures engaging in the legitimate takeover bid is very inappropriate,” the group said.
The group also said it had already offered the creditors details which could dispel speculations, adding. “Relevant rules stipulate that nobody is allowed to issue questions as the creditors have already screened our fundraising process.”
Amid the situation, Hyundai E&C creditors including Korea Exchange Bank, is planning to delay signing a memorandum of understanding with the group. The MOU signing had been scheduled on Wednesday.
Last Tuesday, the group beat bidding rival Hyundai Motor Group to become the preferred bidder for Hyundai E&C, the nation’s largest builder in terms of sales.
Hyundai Group’s bid was reportedly a whopping 5.5 trillion won for a 35 percent stake. It was double the market value of the builder.
More importantly, the bid was 4 trillion won more than the cash held by Hyundai Group’s three main listed units ― Hyundai Merchant Marine, Hyundai Elevator and Hyundai Securities.
Hyundai E&C was spun off from the group after its bankruptcy in 2000. The builder eventually turned itself around after court receivership. In 2009, the company posted a record profit.
By Kim Yon-se (firstname.lastname@example.org)