South Korea’s Hyundai Heavy Industries Group on Monday was formally disbanded and created into four separate entities through a demerger designed to create a holding structure and run shipbuilding and non-shipbuilding operations independently.

The group was broken up into four companies -Hyundai Robotics, Hyundai Heavy Industries (HHI), Hyundai Construction Machinery and Hyundai Electric & Energy System.

Hyundai Robotics would serve as the de facto holding company under ownership of the Chung owner family. It must carry out equity transactions to meet the holding structure requirement over the next two years.

Hyundai Mipo Dockyard first would have to sell 7.98 percent stake in Hyundai Robotics by the end of September of this year. Given its stock price, the sale is estimated at around 200 billion won ($179 million) to 300 billion won. HHI is reportedly seeking a white knight to keep the handsome stake in friendly hands and away from hostile forces.

Over the next two years, Hyundai Robotics must increase its stake in Hyundai Construction Machinery and Hyundai Electric to nearly 20 percent from current 13.4 percent.

One practical solution would be for Hyundai Robotics to exchange its treasury shares with the 10.2 percent interests each in the other three companies held by Chung Mong-joon and other family members. The swap arrangement would push up Hyundai Robotics’ holding in the three business entities over the required 20 percent and also bolster Chung’s control over the holding company.

Cross-affiliate mergers also would be inevitable. The holding entity must simplify the ownership ladder to three from current four-tier system.

The two dockyards Hyundai Samho and Hyundai Mipo may have to be merged because the two at the bottom of the ownership pyramid is required to have either zero or 100 percent in each other, said Choi Jin-myung, an analyst at CAPE Investment & Securities.

By Moon Ji-woong and Yoon Jin-ho

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]