Debt-ridden Hyundai Heavy Industries is expected to put up stake in Hi Investment & Securities for sale but industry experts are skeptical about a successful M&A.

Lack of specialization of the mid-sized Hi investment & securities may lead to failure in attracting a takeover bid from other peer brokerages.


“Many people have taken a dim view on the deal as Hi investment & securities is not specialized in any business compared to other mid-sized securities companies,” an official at a local brokerage house said, declined to be named.

On May 13, the firm’s parent Hyundai Heavy Industries reportedly included its plan to sell Hi Investment as part of self-rescue measures submitted to its main creditor KEB Hana Bank, as it grapples with a liquidity shortage due to mounting losses amid a protracted downturn in the shipbuilding industry.

“As a part of measures to secure liquidity for efficient management, we are mulling various measures including selling stakes in a financial firm owned by our affiliate,” the shipbuilder said in a regulatory filing.

The company’s official Kim Moon-joo declined to comment on further developments on the deal.

Hyundai Heavy Industries commands control over Hi Investment through cross-affiliate investment. Its unit Hyundai Mipo Dockyard bought a 85.3 percent stake in the securities firm at 705 billion won ($596 million) in 2008.

Officials at investment bank firms value Hi Investment at around 500 billion to 600 billion. Even if Hi Asset Management is included in the deal, the price tag is unlikely to exceed 600 billion won, the said.

Given that Hyundai Heavy and its affiliate have poured over 1 trillion won into the brokerage including the initial takeover price and capital increase by issuing new shares which are worth 411.3 billion won, the estimated selling price is disappointing news for Hyundai.

As bigger merger deals of Daewoo Securities and Hyundai Securities have struck earlier this year and last year, not many bidders in the industry are expected to pay keen attention to the bid, they said.

“Companies that sought for M&A already found their match. Hi Investment’s excessive contingent liabilities is another burden,” another source said.

However, Hi Investment can be an attractive acquisition target for some brokerage houses that seek to become a major investment bank with a gross capital of over 3 trillion won.

The capital owned by Hi Investment & Securities stood at 714 billion won as of March this year.

In that sense, a potential buyer could include Meritz Securities which announced that it was to transform itself to a large investment banking company by 2020.

Local firms like Shinhan Investment, Daishin Securities, Hana Financial Investment and Kiwoom securities with equity capital worth over 1 trillion may be able to take advantage of an instant capital boost through the M&A. By Park Han-na (hnpark@heraldcorp.com)