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Hyundai Engineering & Construction US$4.4 billion sale to Hyundai Motor Group
Financial advisers: BoAML, Korea Development Bank, Woori Finance Holdings, Goldman Sachs
Hyundai Motor Group Consortium (HMC Group) in April 2011 completed the acquisition of Hyundai Engineering & Construction from Korea Exchange Bank and eight other creditor-turned shareholder institutions, following a drawn-out and highly dramatized sale process of South Korea’s largest construction company.
The hotly contested transaction was marked by a feud in the founding families who were looking to bring the former parent company into their own groups.
Hyundai E&C came under the control of the nine creditors in 2001 following the 1997-1998 Asian financial crisis, when it had to be separated from its affiliates due to its heavy debt burden.
The nine creditors led by Korea Exchange Bank had been looking to sell their stakes since 2006, when Hyundai E&C exited a bankruptcy workout programme.
The auction process attracted competing bids from HMC Group led by Chung Mong-koo, the chairman of Hyundai Motor, and Hyundai Group led by his widowed sister-in-law Hyun Jeong-eun, both passionate about bringing the former parent company under their own wings.
While the Hyundai Group was initially named the preferred bidder, Hyundai E&C walked out of Hyundai Group’s US$5 billion offer, after seeing no certainty in the funding which Hyundai Group was presenting.
This led the creditors to switch to the smaller bid of HMC Group, which had certainty in funding. The transaction was financed entirely through the HMC Group’s existing cash balance.
The transaction value of US$4.4 billion represented implied multiples of 1.38x 2010 sales and 22.2x 2010 Ebitda.
Upon the completion of the deal, the creditors transferred their 34.9% stakes to Hyundai Motor (20.9%), Hyundai Mobis (8.7%) and Kia Motors (5.2%). The completion of transaction ended with the financial adviser of the seller group pocketing one of the largest M&A advisory fees on record: around US$58 million.
