Take Over Bid; KCC’s Retaliation

Honorary chairman Chung Sahng-young of Kumgang Korea Chemical Co., Ltd. (KCC) has put out a tender offer of Hyundai Elevator’s shares, refusing to give up the management rights of the Hyundai Group.

The offer comes as a counteraction after the government’s orders to dispose of the 20.78 percent of the shares collected, which violated the duty of disclosure. This is expected to intensify the ownership competition between the KCC and the Hyundai Group.

Such a hostile M&A through a takeover bid (TOB) has a history of dealing substantial damages to both parties of the merger, leading a number of merging companies to bankruptcy.

The KCC is planning to buy 571,500 of Hyundai Elevator shares at a price of 70,000 won per share from February 18 to April 13. It was revealed on February 12 that KCC will buy 500,000 shares and the majority shareholder, Chairman Chung, will purchase the rest of the 71,500 shares.

The KCC has made clear its intention to seize control of the business by publicly announcing that, “it is to settle the dispute over the management rights with the former majority shareholder Kim Moon-hee by securing stable management rights through additional stock acquisition.”

Sources reveal that the KCC will sell 7.87 percent of the 20.78 percent of the shares that was ordered to be disposed of by the Securities and Futures Commission, which is owned by three mutual fund managers, and put out a tender offer for 8.01 percent. Additionally 12.91 percent of a private equity fund of Chairman Chung managed by Shinhan BNP Paribas Investment Trust Management Co. is also to be handled likewise.

If the KCC’s takeover bid proves to be successful, KCC’s Hyundai Elevator shares will be increased up to 37 percent pulling ahead of the 30 percent of the shares owned by President Hyun Juhng-eun and her supporters, which will make it difficult for President Hyun to maintain her guard over management rights.

The Hyundai Group, on the other hand, is criticizing KCC’s decision for the takeover bid saying that, “the KCC is only inflaming the dispute after losing their moral justification,” while also discussing a variety of countermeasures including additional stock purchases.

Do-Young Kim nirvana1@donga.com