HHI divests Hyundai Motor stake

Surprise placement by ex-Hyundai Motor affiliate, Hyundai Heavy Industries.

Hyundai Heavy Industries (HHI) took advantage of a strong day on the Korean Stock Exchange yesterday (Thursday) to divest a 1.5% stake in Hyundai Motor. The placement follows a formal separation between the two companies and almost clears out HHI's 3.7 million share stake in the motor manufacturer.

Credit Suisse First Boston led the deal, which was marketed at a fixed discount of 1.8% to the stock's Won 41,500 close. A total of 3.2 million shares were sold, raising $112 million.

The discount was aggressive in the context of a share price that had spiked 3.5% on the day, but has been on a downward trend since early April. The deal priced at a 0.2% discount to the stock's VWAP of Won 41,847 and at a 1.66% premium to Wednesday's Won 41,100 close.

However, the deal was fairly small representing only two-and-half days trading. A bigger deal would have probably needed a steeper discount given the 23 million share overhang of DaimlerChrysler's 10.44% stake, which is also being prepared for sale.

Observers report that nearly 70% of the deal was placed with hedge funds, but say most accounts were intending to hold stock on an outright basis rather than cover shorts, which may have been put in place pending the DaimlerChrysler sale.

Books are said to have closed about 1.7 times covered with participation by roughly 50 accounts. By geography 50% of the deal was placed in Europe, 30% in Asia and 20% in the US.

Year-to-date Hyundai Motor is down 17.82%, having hit a high of Won 55,800 in early April. Much of the decline has been attributed to the company's formal separation from DaimlerChrysler, although analysts believe the move will have little impact on its profitability or future expansion.

Indeed, the analyst community almost uniformly has a buy recommendation on the stock, which is currently trading at only five times 2004 earnings.

¬ Haymarket Media Limited. All rights reserved.

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