Hyundai Motor block extends group asset sale

Hyundai Heavy Industries and Hyundai Samho Heavy Industries raised $191 million from a clean-up sale of Hyundai Motor shares.

Hyundai Heavy Industries sold its entire shareholding in Hyundai Motor for W226 billion ($191 million) through a secondary block trade late Wednesday as it continues to offload non-core assets as part of a corporate restructuring exercise.

Wednesday’s trade saw Hyundai Heavy Industries and its subsidiary, Hyundai Samho Heavy Industries, sell a combined 1.65 million shares in the automotive manufacturing unit at W136,700 per share, according to sources familiar with the situation.

The final pricing was just off the bottom end of the W136,600 to W139,000 marketed range and represents a discount of 1.65% to the stock’s last closing price.

The transaction, solely run by Bank of America Merrill Lynch, was completed on the back of improved market sentiment in Korea following Britain’s decision to leave the European Union last week. As one source familiar with the deal pointed out, Asian stocks have largely stabilised, although investor confidence remains fragile and markets could remain volatile for the next few weeks.

Following the Brexit vote, Korea’s benchmark KOSPI Index dropped by as much as 3% on Friday but has since picked up on four consecutive days and is close to recovering all these losses.

While the sale's timing was not ideal with Hyundai Motor's share price trading close to its five-year low, the blue-chip status of the company attracted orders totaling several times the deal, according to the source.

The final allocation was made to about 35 accounts, which included domestic institutions, hedge funds, and long-only investors.

Also aiding the sale was its relatively small size, given the car maker's hefty $24.4 billion market cap. The stock is also liquid and the deal equated to only about four times the three-month average volume of shares.

Hyundai Motor is Korea’s largest automobile manufacturer by sales.

The transaction was well-flagged in the market because Hyundai Heavy Industries, the world’s largest shipbuilder, has made it clear that it needs to sell off some of its non-core assets to reduce debt.

As part of the debt restructuring, Hyundai Heavy Industries indirectly offloaded its stake in chemical manufacturer KCC through its subsidiary Hyundai Mipo Dockyard in a $121 million block trade earlier this month.

These asset sales are part of the embattled shipbuilder’s W3.5 trillion restructuring plan, which aims to restore its competitiveness by 2018.

As of the end of March, the shipbuilder's total debt stood at a staggering $29.8 billion, which is approximately a quarter larger than its current market cap. It had a debt-to-equity ratio of 109.7%, according to S&P Global Market Intelligence.

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