Hyundai Group on Monday set March 24 as the deadline for binding bids for a controlling stake in its brokerage arm Hyundai Securities, but a key potential buyer said it may not participate due to pricing difficulties.

Korea Investment Holdings, one of the six groups currently conducting due diligence for the combined 22.56 percent stake being sold, said it is having difficulty looking into Hyundai Securities’ financial health, as it was denied access to information on its project financing deals. 

“Since project financing involves a higher risk of loss, we need to check it before pricing our offer,” said an official at Korea Investment. “Without a proper due diligence, we can’t make a binding bid.”

KB Financial Group, another potential bidder, is also said to be facing similar issues. The due diligence is scheduled to be completed by March 18.

Aside from access to financial information, bidders are also not happy with Hyundai Group’s recent decision regarding the right of first refusal held by another affiliate, which effectively sets a floor price for the stake sale, deal observers said.

The decision, announced last month, laid out conditions for Hyundai Elevator to exercise the preemption right. The elevator firm will preempt the stake sale only when the buyer offers a price below what it sees as a minimum level, which multiple reports said is about 650 billion won ($542 million). This is about 1.9 times the stake’s current market value of around 350 billion won.

Aside from Korea Investment and KB Financial, which both have their own brokerage business, the remaining four in the race are all private equity firms, including Seoul-based Pinestreet and foreign-based Actis.

This is the second time that the group is trying to sell the unit after last year’s negotiations with Orix fell through amid rumors that the two had a secret arrangement to later return the unit to Hyundai Group. The Japanese fund had offered to pay 660 billion won for a stake of 22.4 percent.

This time around, Hyundai Group is selling the 22.4 percent stake held by Hyundai Merchant Marine and shares owned by group chairwoman Hyun Jeong-un and her family, raising the total stake up for grabs to 22.56. The group plans to announce a preferred bidder by the end of the month. 

By Lee Sun-young
(milaya@heraldcorp.com)