May 10, 2024

• 

[THE INVESTOR] Despite Hyundai Motor Group’s denial, industry pundits project the auto group will revamp its governance structure and adopt a holding company structure soon.

“Hyundai Motor Group will likely speed up restructuring its governance structure as it is not immune from the government’s chaebol reform plan,” said Yoon Tae-ho, an analyst at Korea Investment and Securities. 

There have been speculations in the past that the family-owned auto conglomerate -- headed by Chairman Chung Mong-koo -- may adopt a holding company structure. The discussions were heightened especially after new Korean President Moon Jae-in -- who is determined to reform large conglomerates in the country -- assumed office earlier this month.

Moon’s choice of professor Kim Sang-jo -- nicknamed “chaebol sniper” for his longtime shareholder activism -- as the new head of the state’s antitrust watchdog Fair Trade Commission has fueled the speculations.

“Hyundai is the only company where the cross-shareholding structure plays a vital role in maintaining and succeeding the founding family’s control,” Kim said at a press conference last week.

Hyundai, however, denied it is planning to adopt a holding company structure any time soon.

Industry experts, however, say the restructuring is imminent.

Many experts view the auto giant will set up a holding company, tentatively named Hyundai Motor Group Holdings, as a likely choice among plausible scenarios.

“The most convincing scenario is to form a holding company,” Yoo Ji-woong, an analyst from eBest Investment & Securities said, citing cost issues.

“Hyundai Motor, Kia Motors and Hyundai Mobis will be divided into investment and business divisions, with the goal of combining three investment divisions to form a holding company. The shift to holding company structure will cost about 1.7 trillion won (US$1.5 billion), which is relatively smaller than other scenarios.”

Local brokerage firms estimate it will cost about 3 million won to 4 trillion won for Hyundai to cut its circular structure by selling the affiliates’ stakes in each other.

“Hyundai Motor Group’s size is huge, which makes it difficult to resolve the cross-shareholding structure by simply selling the shares,” said Lee Sang-heon, an analyst at Hi Investment & Securities. “A holding company structure is the best way to resolve the cross-shareholding structure while solidifying Vice Chairman Chung Eui-sun’s control in the company.”

Hyundai Motor Group’s circular structure starts from Hyundai Mobis, which owns 20.8 percent shares of Hyundai Motor. Hyundai Motor has a 33.8 percent stake in its sister affiliate Kia Motors, which holds 16.9 percent shares of Hyundai Mobis.

By Ahn Sung-mi (sahn@heraldcorp.com)