Hyundai Securities Co has accepted the new terms of a US$850 million deal that would pass management control of the company and two affiliated firms to a US financial consortium, government officials said yesterday.
Two weeks ago, a US consortium led by the insurance giant American International Group and New York merchant bank WL Ross & Co signed a preliminary agreement to become the controlling shareholders in Hyundai Securities Co and financial affiliates Hyundai Investment Trust & Securities Co and Hyundai Investment Trust Management Co.
If the deal goes through, the offered price of US$850 million would be the largest foreign investment ever made in the South Korean financial sector.
As a way to split risks, the deal requires the Seoul government to pump an extra 700 million into the Hyundai affiliates.
At one point, the US investors threatened to abandon the deal unless the offered price for new preferred shares to be issued by Hyundai Securities was lowered. Hyundai Securities initially had asked 8,940 won (US$6.98) per new share, while the US consortium wanted 7,000 won (US$5.46).
Preferred stock has preference over common stock in the payment of dividends and liquidation of assets. It does not ordinarily carry voting rights.
Over the weekend, Hyundai accepted the US demand.
"The government was informed that Hyundai Securities has decided to accept the US demand to avoid shocks that may result from a collapse of the deal," said Lee Woo-chul, a director at the Financial Supervisory Service.
Lee said the government regulator was not involved in the Hyundai decision.
There was no immediate confirmation of the agreement from Hyundai Securities Co.
The price of Hyundai Securities Co shares listed on Korea Stock Exchange has dropped nearly 20 percent to 8,000 won (US$7) in the past month and is expected to fall further to 7,000 won (US$5.46) soon, officials said.
The new terms will boost the American investors' share in Hyundai Securities to 33.1 percent from the previously projected 29.5 percent, making it the largest shareholder in the firm, officials said.
The new terms would not affect the original agreement, that would give the US consortium the right to control more than half of the shares in the two smaller Hyundai firms, they said.
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