AIG to lead US $1.6 billion investment in Hyundai
( 2001-08-23 14:29 ) (7 )

South Korea announced on Thursday a two trillion won ($1.6 billion) deal to hand over management control of three Hyundai Group financial units to a consortium led by American International Group

The AIG-led consortium signed a memorandum of understanding (MOU) to invest 1.1 trillion won in the companies, regulators said, which would mark the biggest ever foreign investment in South Korea.

The government, which for months had resisted AIG demands to sweeten the deal, would invest 900 billion won, Lee Woo-chul, a director-general at the regulatory Financial Supervisory Commission (FSC), told a news conference.

A final pact was expected by October to end more than a year of negotiations.

The deal calls for the AIG-led group to take management control of Hyundai Securities, Korea's second largest brokerage, and two smaller affiliates.

Under the deal the AIG-led group will take a controlling 29.4 percent stake in the brokerage and it along with the government will take 100 percent stakes in the brokerage's two unlisted trust units.

Drawing foreign investment to help struggling financial firms has been a major part of the government's push to reform a sector still recovering from debts left by the 1997-98 Asian financial crisis.

"This is a good news for Korea," said Chae Seung-ki, an analyst at SK Securities Co.

"The ownership change and fresh capital injection will be a boost for Hyundai companies."

Once Korea's mightiest conglomerate, Hyundai has splintered over the last year as affiliates such as Hyundai Motor and Hynix Semiconductor spun off.

AIG leads a consortium of 25 entities invested in funds managed by Wilbur Ross, California Public Employees' Retirement System, GE Capital, State of Wisconsin Investment Board and TransAmerica Corp

INVESTMENT BREAKDOWN

The FSC's Lee said AIG would inject 600 billion won into Hyundai Investment Trust and Securities, the most ailing of the three firms.

It plans to invest 400 billion won in Hyundai Securities and another 100 billion won in the smaller Hyundai Investment Trust Management.

The government would invest only in the two unlisted trusts, Lee said, including a 45 percent stake in Hyundai Investment Trust and Securities.

The investment would give the world's largest insurance firm access to a vast network of Hyundai companies to sell its products as the three firms have 245 branches nationwide, analysts said.

The benchmark Korea Composite Stock Price Index (KOSPI) was little changed, off 0.36 percent to 572.81 at 0414 GMT.

Hyundai Securities shares were down 7.2 percent to 9,330 won after two days of gains that had been helped by media reports of the pending MOU.

The stock has gained 15 percent in the past month.