Hyundai Group Chairman Chung Mong-koo talks with Hyundai Steel executives during his tour to the company’s steelworks.(Photo:Hyundai Steel) 

Hyundai Steel said it would take over its sister steelmaker, Hyundai Hysco. 

Hyundai Steel’s merger with Hyundai Hysco will be submitted to a general shareholders’ meeting for approval on May 28 before being finalized by July 1. If Hyundai Steel takes over Hyundai Hysco as planned, it will lead to the creation of a mega-steelmaker with 31 trillion won in assets and 21 trillion won in annual sales. 

Hyundai Steel and Hyundai Hysco each held a shareholders’ meeting on April 8 to give the go-ahead to the merger plan. The ratio of Hyundai Steel’s merger with Hyundai Hysco is 1:0.8577. Hyundai Steel will issue new shares and swap them for Hyundai Hysco shares at a ratio of 1:0.8577.    

The merger has been a long-standing issue for both companies. Hyundai Steel has already taken over Hyundai Hysco’s cold-rolled steel segment, which accounted for nearly 60 percent of the latter’s revenues. At that time, Hyundai Steel had integrated the steel production process ranging from molten iron to cold- and hot-rolled steel sheets. Previously, Hyundai Motor Group had a two-track structure in which Hyundai Steel produced raw steel from the furnace and hot-rolled steel sheets, and Hyundai Hysco fabricated hot-rolled steel sheets into cold-rolled plates for manufacturing cars. 

Afterward Hyundai Steel had been considering absorbing other businesses of Hyundai Hysco. 

Following the completion of the merger, Hyundai Steel plans to diversify its business portfolios to steel plant and businesses related to light-weight automobiles. In particular, Hyundai Steel will absorb Hyundai Hysco’s 13 overseas steel service centers in nine foreign countries, including the United States, China and India. Hyundai Steel plans to ramp up its automobile steel plate technology and quality management capabilities, while coping with changes in the demand of the global car plate demand market.  

For Hyundai Motor Group Chairman Chung Mong-koo, the merger is extraordinary. 

Chairman Chung disclosed his determination to venture into the steel-making industry when he took office as chairman of the conglomerate in 1996. His dream began to come to fruition when he was permitted to establish a blast furnace steelworks. The company finally achieved a vertical integration of steel-making process ranging from molten iron to steel plates for producing cars when it took over Dongbu Speciality Steel, an automotive parts and materials maker, in 2014. And the latest merger will allow Hyundai Steel to expand its business scope to overseas sales, contributing to the development of the group’s materials business. Chairman Chung has always stressed the need to enhance of the quality of materials so Hyundai Motor Group could square off global automaker juggernauts.

The upcoming merger will restructure the Korean steel-making industry into two power companies — POSCO and Hyundai Steel. Hyundai Steel posted 16.763 trillion won in sales and 1.491 trillion won in operating profit in 2014 on consolidated financial statements, while Hyundai Hysco racked up 4.214 trillion won in sales and 351.5 billion won in operating profit. The merged company will amount to 20.976 trillion won in combined sales, 1.842 trillion won in combined operating profit, and 31.475 trillion won in combined assets. 

The consolidation will narrow the gap between POSCO and Hyundai Steel. POSCO raked in 65.098 trillion won in sales, 3.213 trillion won in operating profit, and 865.252 trillion won in assets in 2014 on consolidated financial statements. Hyundai Steel plans to make the most of Hyundai Hysco’s overseas steel service centers to make up for a lack in overseas sales — its lagging business compared to POSCO.