Hyundai Engineering & Construction bidders up stake in ad war

Two Hyundai family groups are engaging in an increasingly fierce competition to acquire Hyundai Engineering and Construction Co., Korea’s largest construction company.

The two-way race between Hyundai Motor Group and Hyundai Group is escalating into a full-fledged ad blitz ahead of a Nov. 15 deadline for bidders to present their final proposal.

Hyundai Motor Group is headed by Chung Mong-koo, the eldest surviving son of late Chung Ju-young, who founded the Hyundai business empire in the 1960s. Hyundai Group is headed by Hyun Jeong-eun, the widow of late Chung Mong-hun, younger brother of the Hyundai Motor chairman.

Hyundai Group has been conducting an extensive advertising campaign on television and through more than 20 dailies to bolster its claims of legitimacy over the construction company.

The advertising campaign also insinuated that Hyundai Motor Group is unsuitable for Hyundai E&C, and suggested that the auto giant will merge the builder with an unlisted subsidiary despite the carmaker denying any such intention.

Hyundai Motor Group has refrained from responding so far. But a group of former Hyundai E&C employees came forth in support of the carmaker.

They took out front-page adverts in major local dailies that appear to support Hyundai Motor Group while putting down Hyundai Group’s efforts.

Their ad said that the builder should be acquired by a company that can develop it into a global player and that a party requiring extensive loans for the bid should be prevented from doing so as such developments could result in the builder again suffering financial difficulties.

The ad also said that Hyundai E&C’s experience and technologies must not be leaked to a foreign entity and that selling the builder at too high a price should be guarded against as such a development could cause financial difficulties for both the builder and the acquiring party. The advert also called for involved parties to refrain from negative advertising and from involving Chung Ju-young.

Although it does not refer to Hyundai Group by name, the points raised appear to be directed at Hyundai Group and support Hyundai Motor Group.

Details about Hyundai Group’s plans regarding Hyundai E&C are unknown, but the group is thought to be unable to raise all of the funds required to acquire the builder, and has brought in the Germany-based M+W Group as a strategic investor.

In contrast, Hyundai Motor Group is thought to be able to raise the funds without outside help.

Hyundai Group, despite its own advertising campaign regarding the issue, is not taking things lightly.

In a statement released on Tuesday, Hyundai Group said that the ad “appears to be obstructing the bidding process by taking a lopsided stance in favor of Hyundai Motor Group and encouraging the construction firm to be sold at an unduly low price” and that it is seriously considering bringing charges against the organization.

“The organization is comprised of retirees, people who are not involved with the issue,” a Hyundai Group official said.

“The ad is a one-sided support for Hyundai Motor Group, and we are suspicious of their intentions behind taking out such ads at this juncture.”

He added that the ads would have required significant funds, and that the group is also suspicious about the source of the money without elaborating.

Hyundai Motor Group, however, remains silent about the issue.

“The group will not respond to such adverts. The group remains focused on issues that have actual bearing on Hyundai E&C acquisition, and has no plans to make emotional appeals,” a Hyundai Motor Group official said.

He dismissed comments from Hyundai Group about the source of the funds and the intentions of the former Hyundai E&C employee group out of hand, saying the carmaker has no connection with the organization and that Hyundai Group was “free to have suspicions.”

By Choi He-suk (cheesuk@heraldm.com)
http://www.koreaherald.com/business/Detail.jsp?newsMLId=20101103000656