Hyundai Motor Group announced on March 28 a plan to improve a corporate governance structure by making Hyundai Mobis a virtual holding company of the group and easing cross-shareholdings.
The plan calls for disposing Hyundai Motor Group Chairman Chung Mong-koo and Vice Chairman Chung Eui-sun’s stakes in Hyundai Globis a 6.7 percent share and a 23.7 percent stake in the group’s logistics unit each and buying states in Hyundai Mobis group subsidiaries. It would simplify the group’s governance in which the Chungs would have a combined 30.2 percent stake in Hyundai Mobis, which would own 20.8 percent of Hyundai Motor and other group subsidiaries.
The business group has come under fire for murky governance, caused by cross-shareholdings in which for instance, subsidiary A owns shares in company B, which possess shares in C, which also has shares in A.
Speculation had circulated that Hyundai Motor Group would improve its corporate governance after establishing a holding company and minimize related costs through the delaying payment of the transfer tax. But the group decided to choose a standard course of paying more than 1 trillion won in transfer tax from the disposition of Hyundai Motor shares.
The group plans to finish the disposition of shares by July.
Following an extraordinary shareholders’ meeting slated for May 29, the restructuring process will start with Hyundai Mobis’ spinning off the module and after-sales automotive parts businesses and merging them into Hyundai Glovis. The division and merger ratio between Hyundai Mobis and Hyundai Glovis has been set at 0.61:1.
Hyundai Mobis will focus on strengthening the competitiveness of such future cars as self-driving vehicles following the division & merger while Hyundai Glovis will integrate logistics and transportation networks business that have dispersed among group subsidiaries, a Hyundai Motor official said.
The restructuring process would lower the two Chungs’ combined stake in Hyundai Glovis from the current 29.9 percent to 15.8 percent. The Chungs will dispose all their shares in Hyundai Govis completely after late July when new shares of the soon-to-be-merged Hyundai Glovis begin to change hands, and with the money accruing from the disposition of Hyundai Glovis shares, they will buy stakes in Hyundai Mobis Gia Motors, Hyundai Steel and Hyundai Glovis now own. The process will raise the Chungs’ share in Hyundai Mobis to 30.2 percent, simplifying the group’s corporate governance.
Chairman Chung now owns a 6.9 percent stake in the automotive unit. The Chungs will dispose of their stakes into Hyundai Glovis to Kia Motors and other subsidiaries. If Hyundai Motor Group shifts into a holding company system, it would be banned from owning financial subsidiaries, but the restructuring process will allow the group to retain financial subsidiaries and avoid the criticism of assigning projects and orders among subsidiaries.
No figures are available on how much the group will pay for the restructuring since group subsidiary shares will severely fluctuate. Based on the closing prices on March 27, the cost for eliminating cross-shareholdings was estimated at about 4.5 trillion won. If the money accruing from the Chungs’ disposing of shares in Hyundai Glovis does not surpass the estimated cost, they will have to make up for the difference. The Chungs will also have to shoulder about 1 trillion won in transfer tax from the disposition of the shares.
“The restructuring plan has reflected largest shareholders’ intention to stress social responsibility,” a group official said.
The Fair Trade Commission has released a statement saying that it is considering Hyundai Motor Group’s efforts to improve its corporate governance positively.