Hyundai Motor Co.’s and Kia Motors Corp.’s purchases of shares in affiliate Hyundai Hysco Co. increases the likelihood that Hyundai Motor Group will merge its steel units, according to Tong Yang Securities Co.

Hyundai Motor, South Korea’s largest automaker, bought 2.6 million Hysco shares and Kia acquired 1.4 million, both from Japan’s JFE Steel Corp., the Seoul-based companies said in separate statements after the market’s close on March 16.

The combined purchases, equivalent to about a 5 percent stake, boosts speculation that the group plans to combine two of its major steelmaking units, Hysco and Hyundai Steel Co., said Park Kee Hyun, an analyst at Tong Yang in Seoul. Hysco rose as much as 4.5 percent on the Korea stock exchange today, and Hyundai Steel gained as much as 2.9 percent.

“There is anticipation that Hyundai Motor Group is placing emphasis on the steel business and that the merger of the two steelmakers may happen sooner rather than later” Park said by telephone. He has a buy rating on both companies, according to data compiled by Bloomberg.

The purchases boost Hyundai Motor’s stake in Ulsan-based Hysco to about 29 percent from 26 percent, and Kia’s shareholding to about 16 percent from 14 percent, according to their statements and Bloomberg data.

Hyundai Steel appointed Chung Eui-sun, vice chairman of Hyundai Motor and the only son of the group chairman, as a board member on March 16, the steelmaker said in a separate filing.

Kia is Hyundai Steel’s largest shareholder with a stake of about 21 percent, while Hyundai Motor owns about 34 percent of Kia, according to data compiled by Bloomberg.

Besides Hysco and Hyundai Steel, Hyundai Motor Group has a third steelmaking unit, Hyundai BNG Steel Co., according to a brochure from the group. Hyundai Steel owns 41 percent of BNG, based on Bloomberg data. 

(Bloomberg)