Hyundai Hyms sale kicks off as J& Private Equity sends out teaser letters

Hyundai Hyms Co., a Kosdaq-listed ship block manufacturer, is officially on the auction block as its private equity owner, J& Private Equity (J&PE), begins the sale process.

J&PE has distributed teaser letters for the sale of its entire 52.88% stake to potential buyers, investment banking sources said on Tuesday.

The largest shareholder has mandated NH Investment & Securities and PwC Korea, also known as Samil PwC, as joint sale advisers.

The stake, including a control premium, is expected to fetch around 500 billion won ($360 million), based on Hyundai Hyms’ market capitalization of 660 billion won as of Monday’s share price.

Founded in 2008, Hyundai Hyms manufactures ship blocks and piping systems – essential components used in ship assembly.

Hyundai Hyms generates more than 90% of its sales revenue from HD Hyundai Co.’s shipbuilding subsidiaries, such as HD Hyundai Heavy Industries Co. and HD Hyundai Samho Co.

Hyundai Hyms was originally a unit of HD Hyundai but was sold to J&PE in 2019 as part of HD Hyundai’s capital restructuring to acquire Daewoo Shipbuilding & Marine Engineering (DSME).

HD HYUNDAI SHOWS INTEREST

Hyundai Hyms went public on the Kosdaq market in January 2024, and J&PE began exploring an exit after the stock lock-up period expired earlier this year.

At the time of acquisition, Hyundai Hyms generated annual revenue of around 100 billion won. Since then, J&PE has more than doubled the company’s top line to 223.1 billion won in 2024 on a consolidated basis through active value-up initiatives.

In 2021, Hyundai Hyms acquired Won Hi-Tech Corp., a maker of industrial machinery, to diversify its revenue streams and deepen its footprint in shipbuilding equipment – a classic bolt-on strategy often employed by private equity sponsors.

In February, sources said HD Hyundai was in talks with J&PE to buy back the ship parts manufacturer to improve productivity and supply chains.

REVISED COMMERCIAL ACT COULD BE A VARIABLE

Analysts said the recent changes to Korea’s Commercial Act, which mandate directors’ fiduciary duties to all shareholders, not just controlling ones, have complicated M&A deals involving listed companies.

Boards are increasingly reluctant to grant exclusive due diligence access or endorse deals that may benefit controlling shareholders disproportionately.

“Listed companies can't simply run auctions favoring major shareholders anymore,” said a Seoul-based M&A expert.

The legal uncertainty is coupled with market volatility.

Market watchers said even unconfirmed rumors of a sale can drive retail investor speculation and inflate valuations.

On Tuesday, shares in Hyundai HIMS rose as much as 19% to an intraday high of 22,300 won as news of the sale surfaced. The benchmark Kosdaq index was trading 1% lower later in the day.

Write to Eun-Kyung Song at norae@hankyung.com

In-Soo Nam edited this article.