SEOUL–South Korea’s top carmaker Hyundai Motor confirmed Monday it would bid for a troubled construction firm, setting the stage for a bidding war with its former parent the Hyundai Group. Hyundai Motor said in a statement it would seek a major stake in Hyundai Engineering and Construction to strengthen its “future business opportunities and diversify its business portfolio”.
The automaker said it would use its own capital to take over the builder, adding it would send a letter of intent to creditors of Hyundai Construction later on Monday.
The nine creditors led by the Korea Exchange Bank announced Friday they would sell a 34.88 percent stake, potentially worth US$3 billion. A preferred bidder will be announced in December.
Hyundai Motor said the construction firm would be able to further cement its global position through the automaker’s 8,000 manufacturing and sales operations in more than 150 countries.
It would also be able to take part in Hyundai Motor’s existing high-speed rail business overseas, it said.
“This type of synergy…will enable Hyundai Construction to become a fully integrated world-class engineering company.” The announcement set the stage for a struggle for control of the builder between Chung Mong-Koo, chairman of the cash-rich carmaker, and his widowed sister-in-law Hyung Jeong-Eun, who leads the much smaller Hyundai Group. The huge Hyundai conglomerate spun off Hyundai Motor and some other businesses in the wake of the 1997-98 economic crisis.
Hyundai Engineering and Construction came under creditors’ control in 2001 in a bailout package that included a 2.9 trillion won (now US$2.5 billion) debt-for-equity swap.
The rump of Hyundai Group now includes a shipping firm, a brokerage, a tour company that operates projects in North Korea and an elevator maker. Last month three of the affiliates — Hyundai Merchant Marine, Hyundai Securities and Hyundai Elevator — each disclosed in public filings that they intend to bid for the construction firm.
Analysts say Hyundai Motor, sitting on some US$4.3 billion in cash, is in a far better position to bid than the indebted Hyundai Group.