HD Hyundai Co., the world’s second-largest shipbuilder, is in talks with a private equity firm to buy back a South Korean ship parts manufacturer to improve productivity and supply chains, investment banking industry sources said on Friday.
HD Hyundai Co. has been discussing acquiring Hyundai Hyms Co. from its largest shareholder J& Private Equity since its lockup period expired on Jan. 26, according to the sources.
The Seoul-based private equity firm, which holds a 53.06% stake in Hyundai Hyms through a special purpose company, pledged not to sell the stake for one year when the company was listed on the country’s junior Kosdaq market in January 2024.
HD Hyundai Co. sold a 75% stake in Hyundai Hyms to J& Private in 2019 for 97.5 billion won ($67.2 million) when the conglomerate tried to take over Daewoo Shipbuilding & Marine Engineering Co., which is Hanwha Ocean Co. currently. HD Hyundai Co.’s takeover failed as the European Commission vetoed the combination in 2022.
The leading South Korean shipbuilding group is expected to enhance productivity and supply chains through the acquisition of Hyundai Hyms, which manufactures curved blocks.
Hyundai Hyms generates 94% of its sales from the conglomerate’s shipbuilding subsidiaries such as HD Hyundai Heavy Industries Co. and HD Hyundai Samho Co.
PRICE MATTERS
HD Hyundai Co. is reluctant to take control of Hyundai Hyms back as its value surged, given the recent boom in the global shipbuilding sector, industry sources said.
Hyundai Hyms’ market capitalization stood at 667.9 billion won as of Monday, more than six times around 100 billion won in 2019 when HD Hyundai Co. sold the company.
Its value was predicted to have risen further thanks to better earnings with its operating profit up 53% to 16.9 billion won in the first three quarters of 2024 from a year earlier. Sales rose 24% to 166.8 billion won during the period.
The increasing value is expected to make it difficult to reach a deal, the sources said.
“Hyundai Hyms may be sold to a third party if the negotiation drags on,” said a brokerage industry source.
HD Hyundai is a preferred bidder but that does not necessarily mean that it must buy Hyundai Hyms from J& Private.
By Jeong-Cheol Bae
bjc@hankyung.com
Jongwoo Cheon edited this aricle.
