Kia begins fundraising to help takeover of Hyundai E&C

Kia Motors has begun to raise acquisition funds after joining a consortium with Hyundai Motor and Hyundai Mobis to take over Hyundai Construction and Engineering.

Hyundai-Kia Automotive Group said Wednesday that a Kia board meeting decided on the sale of 4 million (39.3 percent) of 8.54 million shares in Hyundai Wia, a manufacturer of automotive parts, machine tools and heavy machinery. The sale is set for next month.

The initial share price of Hyundai Wia is expected to start at 53,000 to 60,000 won (47.5 to 54 U.S. dollars). Kia will raise 212 billion to 240 billion won (190 million to 215 million dollars) by selling shares of the automotive parts company.

Kia said the selloff is intended to secure operating funds, but those in and out of the company say money secured from the sale will be used to acquire the construction company.

A group source said, “Kia Motors doesn’t have a lot of extra cash but needs funds to take over Hyundai Construction & Engineering. So I understand that Kia has decided to sell Hyundai Wia stocks.”

Separately, Hyundai Wia CEO Yim Heung-soo told reporters Tuesday, “We will invest funds raised by the public offering in technology development. By doing so, we will generate 20 trillion won (18 billion dollars) in revenue and grow into one of the top 20 companies in Korea and one of the top 20 automotive parts companies in the world by 2020.”

“We believe we can achieve these goals since the prospects of the automotive industry are bright and based on our competitiveness in machine tools and defense products. In addition, we will nurture new growth engines.”

Hyundai Motor owns 39.5 percent of Hyundai Wia and Kia 39.3 percent. If the automotive parts company goes public, it will be the automotive group’s ninth listed affiliate.

buddy@donga.com