South Korea’s top automaking conglomerate Hyundai Motor Group received investors’ attention amid expectations that the family-run business may be next to pursue a major reorganizing into a holding and separate multi-operating entity structure as Hyundai Heavy Industries had done and Samsung Group is working on.

Shares of the group’s major unit Hyundai Motor Co. jumped 8.63 percent in intraday trading Tuesday to finish at 170,000 won ($151.3). They fell 0.29 percent to 169,500 won on Wednesday from bargain-hunting.

Kia Motors Corp. gained 3.51 percent to close at 38,300 won and parts company Hyundai Mobis Co. 3.05 percent at 253,500 won. On Wednesday, the excitement simmered down and shares of Kia Motors retreated 2.22 percent to 37,450 won while those of Hyundai Mobis were up 0.79 percent to 255,500 won.

Rumors spread that Hyundai Motor could be preparing a demerger scheme after Hyundai Motor last Friday issued a disclosure statement that it would be levying its affiliates Hyundai Steel Co. and Hyundai Glovis Co. 13.9 billion won combined for the use of the Hyundai Motor brand. It is the first time Hyundai Motor was collecting fees for its corporate trademark.

Such fees are levied on companies operating under holding entities. An operating entity does not possess any assets, whereas a holding entity owns the business’s assets. SK and LG Group through holding entities collect fees from operating units for the use of the corporate brand, which is considered an asset.

Under the scheme presumed by the industry watchers, Hyundai Mobis, which holds the largest stake in Hyundai Motor, could be turned into a holding entity. The founding Chung family could still maintain ownership of the multi-business organization by commanding the majority shares in Hyundai Mobis. It would be easier for the Chung family to increase their shareholding in Hyundai Mobis as its market value is still much cheaper than Hyundai Motor’s.

Investment bankers estimate a different outline. They believe the three major companies - Hyundai Motor, Kia Motor, and Hyundai Mobis - could each spilt up into holding and operating entities and then have the holding entities merged into one.

When assets are transferred to the holding entities (limited liability company LLC), the Hyundai Motor LLC would own a 33.9 percent in the corporation entity of Kia Motors, the Kia Motors LLC a 16.9 percent in Hyundai Mobis, and the Hyundai Mobis LLC a 20.8 percent in Hyundai Motor. When the LLCs are united into one, a Hyundai Motor Group holding entity would become complete.

A Hyundai Motor Group brushed aside the hyped expectations for a sweeping reorganization. “The market is stretching a normal business decision on trademark too far,” he said.

By Han Woo-ram

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