Hyundai Group inks $4.8 billion E&C buy

SEOUL (BestGrowthStock) – Hyundai Group signed a $4.8 billion preliminary deal to buy South Korea’s top contractor Hyundai Engineering & Construction Co Ltd (000720.KS: ) on Monday, but shares of Hyundai Group companies and those of the builder dropped on concerns about funding the acquisition.

Hyundai Group also filed a suit against the reserve bidder, a consortium led by Hyundai Motor Group (005380.KS: ) on Monday, seeking 50 billion won ($43 million) in damages, saying the world’s fifth-largest auto group had spread misleading information.

In response, Hyundai Motor Group demanded E&C shareholders drop the ‘preferred bidder’ status given to Hyundai Group and raised questions on the rival group’s funding plan, in a fresh twist to an acrimonious battle between rival family members over the control of the flagship unit of the original Hyundai group, which was torn apart by family feud in 2001.

Shipping-focused underdog Hyundai Group was unexpectedly picked as the preferred bidder for the 35 percent stake on November 16, beating out Hyundai Motor Group, when it offered about 5.5 trillion won — more than double the current market value of E&C.

However, top shareholders have delayed signing a deal until the Monday deadline due to uncertainty over its funding plans, which involve a 1.2 trillion won loan from France’s Natixis SA (CNAT.PA: ).

Hyundai Group has said the French investment bank extended the loan without collateral and the deposit was legitimate, a source close to the matter said.

Korea Exchange Bank (004940.KS: ), a main E&C shareholder, said in a statement on Monday that creditors-turned-shareholders have reviewed additional information on the funding plan and would deprive Hyundai Group of its preferred bidder status later if the conglomerate is found of having submitted false or illegitimate documents.

Shareholders seek to sign a final deal in January and complete the sale process by March.

Shares of Hyundai E&C tumbled 13 percent before closing down 2.6 percent. Shares in Hyundai Group’s flagship unit, Hyundai Merchant & Marine (011200.KS: ), also plunged nearly 15 percent before ending 7 percent lower.

“(Hyundai E&C sale) still has a long way to go. I don’t think funding issues were fully resolved yet,” said Byun Sung-jin, an analyst at Mirae Asset Securities.

Hyundai Motor Group also threatened to take legal action against creditors including KEB, if they push ahead with the sale process even as suspicions remain over Hyundai Group’s funding plan. ($1=1156.4 Won)

(Reporting by Ju-min Park and Hyunjoo Jin; Editing by Chris Lewis and Muralikumar Anantharaman)

Hyundai Group inks $4.8 billion E&C buy