$180 million block of Hyundai Steel shares changes hands

Hyundai Capital Services, the automotive financing arm of Hyundai Motor, has sold $180 million worth of stock in Hyundai Steel in the first of three planned divestment exercises which will also include selling shares in Hyundai Motors and Kia Motors.

The block trade, which was launched after the Korean market closed yesterday, saw good demand from domestic investors in particular even though it was priced at a tight 2.65% discount to the most recent market price. The relative scarcity of Korean deals this year helped to boost the deal's attraction.

The offer was jointly led by ABN AMRO Rothschild and JPMorgan and comprised 5.39 million shares that were offered to the market at a 2%-4% discount to Thursday’s close of W32,050 and was priced in the lower half of that range at W31,200.

According to a source, the order book was close to two times covered at the final price and multiple times subscribed at the low end of the price range. Around 40 investors participated.

About 60% of the deal went to domestic accounts, and close to 20% to other Asian investors, leaving only 20%-25% for US and European investors. The non-Korean part of the orders, were split between hedge funds and long-only investors.

Hyundai Capital has been looking to sell down its investment in the three companies for some time in order to boost its cash flow, but the plans have been marred by internal scandals, including an ongoing investigation by the Fair Trade Commission into inter-subsidiary loans within the automotive group.

Once Hyundai Capital saw an opportunity to begin the sales, it likely felt that Hyundai Steel would be the easiest to sell in order to set a discount benchmark for the other two, says a source. Hyundai Steel, Korea’s second largest steel maker, was formerly known as INI Steel.

Hyundai Steel’s share price has risen 53% this year, compared with a 13-point decline in the benchmark Kospi index.