Hyundai mo­tor to buy back $616m in shares

JoongAng Daily - - Business - Bloomberg

Hyundai Mo­tor and Kia Mo­tors will buy back a com­bined 670 bil­lion won ($616 mil­lion) of stock after their pur­chase of prop­erty in Gang­nam Dis­trict for three times the as­sessed price spurred a sell-off.

Hyundai, South Korea’s largest au­tomaker, will buy back 2.2 mil­lion common shares and 652,019 pre­ferred shares, while af­fil­i­ate Kia will buy back 4.05 mil­lion common shares, both at Mon­day’s clos­ing prices, ac­cord­ing to sep­a­rate reg­u­la­tory fil­ings by the com­pa­nies Mon­day. The buy­backs will be com­pleted by Feb. 11 to “sta­bi­lize share prices and im­prove share­holder value,” the com­pa­nies said.

The an­nounce­ment comes almost two months after the au­tomak­ers and Hyundai Mobis won an auc­tion for prime prop­erty in Gang­nam Dis­trict, of­fer­ing triple the as­sessed price to state-run Korea Elec­tric Power Cor­po­ra­tion. Hyundai shares slumped 24 per­cent since the deal was an­nounced on Sept. 18 through Mon­day, com­pared with a loss of 5.1 per­cent for Korea’s bench­mark Kospi In­dex.

“To­day’s an­nounce­ment helps ease con­cerns that Hyundai may cut div­i­dend pay­out and is mean­ing­ful in that the com­pa­nies have taken an ac­tual step to im­prove share­holder value,” said Heo Pil-seok, chief ex­ec­u­tive of­fi­cer at Mi­das In­ter­na­tional As­set Man­age­ment, which over­sees $10 bil­lion, in­clud­ing Hyundai shares. “It will def­i­nitely im­prove in­vestor sen­ti­ment and bring up mar­ket ex­pec­ta­tion for an in­crease in div­i­dend.”

Hyundai climbed 5.7 per­cent to 176,000 won at the close in Seoul trad­ing yes­ter­day, while Kia rose 2 per­cent and the Kospi gained 0.2 per­cent.

Last month, Hyundai said on be­half of the land-deal con­sor­tium that the three com­pa­nies won’t is­sue debt and will use cash to fund the 10.6 tril­lion won pur­chase.

This damped in­vestor op­ti­mism that the com­pa­nies may in­crease their div­i­dend pay­outs. The gov­ern­ment had an­nounced plans in Au­gust to en­cour­age busi­nesses to in­crease wages and div­i­dends by levy­ing a 10 per­cent puni­tive tax on cor­po­rate cash hoards.

Both Hyundai’s CFO Lee Won-hee and Kia’s then-CFO and re­cently pro­moted co-CEO Park Han-woo said the com­pa­nies are con­sid­er­ing an in­terim div­i­dend pay­out at their third-quar­ter earn­ings con­fer­ence call last month to ease in­vestor dis­con­tent. That wasn’t enough to bring share prices back to pre-land deal lev­els. The three com­pa­nies lost about $16 bil­lion in com­bined mar­ket value through Mon­day.

In­vestors are still wait­ing for Hyundai to in­crease div­i­dends, said Lee Jin-woo, a Seoul-based fund man­ager at KTB As­set Man­age­ment, which over­sees about $7.9 bil­lion.

“Buy­ing back shares is bet­ter than do­ing noth­ing,” Lee said by phone. “Still, a div­i­dend pay­out is what in­vestors are wait­ing for and what will re­ally get over­seas in­vestors to change their bear­ish view on Hyundai.”

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