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Hyundai Heavy Wins Court Approval for Hyundai Oilbank Purchase From IPIC

A South Korean court has given Hyundai Heavy Industries Co., the world’s largest shipyard, approval to buy Hyundai Oilbank Co. from International Petroleum Investment Co., backing a ruling in Singapore last year.

Seoul Central District Court accepted Hyundai Heavy’s claim to buy 70 percent of Hyundai Oilbank shares from IPIC, an Abu Dhabi-government investment arm, Judge Chang Jae Yoon said today. The shipyard currently owns 21.13 percent of the country’s smallest refiner.

IPIC said in November 2009 a ruling by the International Chamber of Commerce in Singapore confirming Hyundai Heavy’s right to buy Hyundai Oilbank isn’t enforceable in South Korea. Under an agreement in 1999, shareholders in Hyundai Group, the former parent of Hyundai Heavy, have first priority to buy the stake should IPIC want to sell.

Hyundai Heavy plans to buy the refiner by the end of this month, the company said in an e-mailed statement after the ruling. IPIC will decide whether to appeal after carefully studying details of the ruling, the United Arab Emirates-based company said in a separate e-mail.

Shareholder Agreement Breached

The International Chamber of Commerce in Singapore said Nov. 12 that IPIC breached a shareholder agreement with Hyundai Heavy and ruled that IPIC should sell its 70 percent stake in Hyundai Oilbank for 2.57 trillion won ($2.1 billion), based on 15,000 won a share, to Hyundai Heavy. The Abu Dhabi company said the ruling has no legal effect unless the shipyard obtains a judgment of final enforcement from South Korean courts.

In December, Hyundai Heavy filed a suit in Seoul. The acquisition, potentially Hyundai Heavy’s biggest, would help the company expand its energy business and cut its dependency on building vessels.

Hyundai Heavy fell 0.2 percent to 252,000 won as of 11:21 a.m. in Seoul trading. The stock has advanced 45 percent this year, compared with a 1.4 percent gain in the benchmark Kospi index.

IPIC had wanted to reduce its stake in the refiner since 2007. The company said in April 2008 that Hyundai Heavy failed to make an offer for the shares before inviting bids from third parties.

Hyundai Oilbank has a capacity to process 395,000 barrels a day and is building a 2.1 trillion won unit to expand output of higher-priced fuels. Hyundai Motor Co. also holds 4.35 percent of the refiner and Hyundai Steel Co. 2.21 percent.

Hyundai Heavy is seeking to raise 2 trillion won in loans from lenders, including Korea Exchange Bank and Shinhan Bank.

In 2008, Hyundai filed a petition to the International Court of Arbitration under the International Chamber of Commerce in Singapore to resolve the dispute when IPIC failed to sell its shares in South Korea’s oil refiner.

To contact the reporters on this story: Shinhye Kang in Seoul at skang24@bloomberg.net; Kyunghee Park in Singapore at kpark3@bloomberg.net

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