Hyundai Motor to buy back 23% stake in its auto financing unit

Hyundai Motor to buy back 23% stake in its auto financing unit

Hyundai Motor Group has decided to buy back a 23 percent stake in Hyundai Capital Services, its auto loans arm, from IGE USA Investments, a unit of GE Capital, in an effort to expand its auto financing business in overseas markets, industry sources said Monday.

Currently, IGE is the second-largest shareholder in Hyundai Capital with a 43.3 stake, after Hyundai Motor with a 56.47 stake.

“It is true that the two parties are at the table for a stock deal, but they have yet to reach the final agreement on the details,” a Hyundai Motor Group spokesperson said.

Despite the denial of the group, the sources said the two parties had already reached an agreement to be signed Tuesday. Under the details agreed to, the automotive group’s two automakers — Hyundai Motor and Kia Motors — will take over 3 percent in Hyundai Capital for 100 billion won ($84.4 million) and a 20 percent stake for 700 billion won, respectively.

GE Capital will also push to sell its remaining stake of around 20 percent to other companies in the months to come, the sources added.

The investment of Hyundai Motor Group in one of the financial affiliates also quelled rumors that the automotive group is considering selling its financial arms to adopt a holding company system.

Under current Korean law, a holding company cannot exert control over financial units. This is one reason the nation’s top two conglomerates — Samsung and Hyundai — have been slow in improving their governance structures by replacing cross-ownership among affiliates with the holding company structure, which the nation’s fair trade authorities have pushed for.

Hyundai Motor Group has six financial units under its roof: Hyundai Card, Hyundai Capital Services, Hyundai Commercial, HMC Securities, Hyundai Life Insurance and HMC Investment and Securities. Their businesses vary from credit cards, consumer loans and life insurance to a brokerage.

The debate over changes in governance structure of Hyundai’s financial businesses has heated up since GE Capital decided to sell its stake in Hyundai Capital and Hyundai Card in October. The financial arm of GE also holds a 43 percent stake in Hyundai Card.

Ted Chung, vice chairman and CEO of Hyundai Card, recently dismissed the rumor that Hyundai is considering selling its stake in Hyundai Capital and Hyundai Card via his Facebook account, saying that it is groundless. Chung, the second son-in-law of Hyundai Motor Group chairman Chung Mong-koo, is also CEO of Hyundai Capital.


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