1.9 Times Subscription Amount Purchase Application
Hyundai GEF Holdings Increases Home Shopping Stake to 50.1%
Holding Company Action Requirements Resolved + Expansion of Dividend Income Base
Hyundai Department Store Sells Shares to Improve Financials
Hyundai Department Store Group has achieved two goals by successfully completing a tender offer for its affiliate Hyundai Home Shopping's shares, restructuring its governance and improving Hyundai Home Shopping's financial structure. It is expected that the dividend income base of the holding company Hyundai GF Holdings will also be strengthened through increased dividends from Hyundai Home Shopping in the future.
Hyundai Department Store Group announced on the 24th that the tender offer for common shares of Hyundai Home Shopping, initiated by Hyundai GF Holdings, received purchase applications amounting to 1.9 times the募集 amount. From the 3rd to the 22nd of this month, the tender offer attracted subscriptions for 5,604,602 shares, far exceeding the planned purchase quantity of 3 million shares. The subscription rate for the tender offer reached 186.8%. Hyundai GF Holdings plans to purchase 3 million shares from the subscribed stocks. The purchase price is 64,200 KRW per share, with a total investment of 192.6 billion KRW.
Once the payment of funds and other procedures are completed, Hyundai GF Holdings' stake in Hyundai Home Shopping will increase to 50.1% (6,001,500 shares). Previously, it held a 25.01% stake (3,001,500 shares). Accordingly, Hyundai GF Holdings will be able to establish stable management rights and governance over Hyundai Home Shopping with a majority stake.
Hyundai GF Holdings initially launched the tender offer for Hyundai Home Shopping to meet the "restrictions on holding company activities" under the Fair Trade Act. According to the amended Fair Trade Act in 2021, holding companies must secure at least 30% of shares in listed subsidiaries and at least 50% in unlisted subsidiaries. These requirements must be met within two years after converting to a holding company.
Therefore, Hyundai GF Holdings must increase its stake in Hyundai Home Shopping to over 30% before March next year. It only needs to acquire about an additional 5% from the existing 25.01% stake. However, Hyundai GF Holdings decided to raise its stake to over 50% to ensure stable governance.
Hyundai GF Holdings is expected to gain stable dividend income while restructuring governance. According to industry sources, dividends received from subsidiaries with over 50% ownership are tax-exempt, providing tax-saving benefits. Analyst Seo Jeong-yeon of Shin Young Securities stated, "Although about 200 billion KRW needs to be raised to secure funds for the tender offer, a significant portion of the financial costs can be offset by dividends from Hyundai Home Shopping, so the actual financial burden is not large."
Additionally, Hyundai Department Store, which sold its Hyundai Home Shopping shares to Hyundai GF Holdings, was able to reduce borrowings and improve its financial structure. Hyundai Department Store previously held a 15.8% stake (1,896,500 shares) in Hyundai Home Shopping. Selling the entire stake would have brought in about 121.8 billion KRW, but due to the high subscription rate in the tender offer, only 8.5% (1,015,148 shares) could be sold according to the competition rate.
An investment banking (IB) industry official commented, "From Hyundai Department Store's perspective, the financial improvement effect from selling Hyundai Home Shopping shares was somewhat diminished," but added, "Given the heavy burden of loan repayments, the approximately 65 billion KRW from the share sale can be used to repay some maturing loans."
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