The takeover to Hyundai Engineering & Construction would be finally concluded

Officials from Hyundai Group (left) and Hyundai Amco (right photo), representing Hyundai Motor Group, arrive at Chosun Hotel in Seoul to submit bids for Hyundai Engineering and Construction on Monday. (Yonhap News)

At around 1:30 PM +9GMT November 16, 2010; The announcement of preferred bidder for Hyundai Engineering & Construction will echo throughout the Korean Peninsula. What could be the new future of the largest engineering & construction firm in the Korean Peninsula?

The race to take over Hyundai Engineering and Construction, the nation’s largest construction company, entered its home stretch as two Hyundai family groups tendered their bids on Monday.

The successful bidder will acquire 34.88 percent or a little less than 39 million shares, with prices expected to come in at between 3.5 trillion won ($3.1 billion) to 4 trillion won.

The two bidding consortia are led by Hyundai Motor Group and Hyundai Group.
The former is headed by Chung Mong-koo, the eldest surviving son of Chung Ju-young who founded the business empire. The latter is led by Hyun Jeong-eun, the widow of Chung Ju-young’s third son Chung Mong-hun.

Hyundai Engineering & Construction closed at 73,100 won on Monday, down 0.55 percent from Friday.

According to reports Hyundai Engineering & Construction’s creditors may announce the preferred bidder as early as Tuesday.

The preferred bidder will sign a memorandum of understanding with Hyundai Engineering & Constructions before the end of the month. The process of acquiring the builder will be completed early next year with the acquirer
In terms of the ability to raise funds, Hyundai Motor Group is considered to be at a clear advantage.

Hyundai Motor Group’s bid is being made by a consortium of Hyundai Motor Co., Kia Motors Corp. and Hyundai Mobis Co.

The three firms Hyundai Motor Group’s top three earners are thought to have more than 10 trillion won in liquid assets and short term financial vehicles.

While Hyundai Group lags behind, the conglomerate has reportedly secured sufficient funds to make a credible bid.

Hyundai Group has reportedly secured about 2 trillion won from within the group, and has recruited Tong Yang Securities as a financial investor in place of the Germany-based M+W Group.

Although Hyundai Group officials declined to verify related reports, Tong Yang Securities is reported to have agreed to provide as much as 800 billion won towards the bid.

However, with Korea Finance Corp. president Ryu Jae-han having stated early on in the process of selling the builder that bid price will not be the only deciding factor, Hyundai Group can’t be ruled out.

With 11.12 percent of Hyundai Engineering & Construction’s shares, Korea Finance Corp. is the builder’s largest shareholder.

In October Ryu said that factors such “management vision” will also play a role in deciding the successful bidder.

Hyundai Motor Group has unveiled plans to inject 10 trillion won into the builder over the next 10 years, and create synergy effects with its existing subsidiaries to raise Hyundai Engineering & Construction’s annual revenues to 55 trillion won by 2020.

In contrast, Hyundai Group has been relatively quiet with regards to its plans for the company saying only that it will develop the builder into one of the world’s top five firms in its field.

Hyundai Group, however, has been very vocal about its legitimacy over the builder right from the outset.

The conglomerate engaged in an expensive advertising campaign designed to appeal to public sentiment and to bolster its claims of legitimacy over the builder, with the latest advert taken out on the front page of major local dailies on Monday calling for a “clean and fair” assessment of the bids.

By:
By Choi He-suk (cheesuk@heraldm.com)
http://www.koreaherald.com/business/Detail.jsp?newsMLId=20101115000851