Mando May Buy Former Affiliate Halla Climate From Visteon

Mando Corp. (060980), the largest unit of South Korea’s Halla Group, said it may offer to buy the 70 percent stake in former affiliate Halla Climate Control Corp. (018880) owned by Visteon Corp. (VC)

Mando has hired an adviser, though no decision has been made on an offer, South Korea’s second-largest maker of auto parts said in a regulatory filing today. Halla Climate shares rose 2.7 percent to 24,500 won at the close in Seoul trading, increasing the company’s market value to 2.6 trillion won ($2.3 billion). Mando gained 0.3 percent.

The move highlights Chairman Chung Mong Won’s ambitions to rebuild the Halla Group, which went bankrupt in 1997 after years of overexpansion saddled the conglomerate with at least 6.5 trillion won in debt. Visteon has surged 31 percent this month in New York trading amid speculation the Van Buren Township, Michigan-based company may attract a bid for Halla Climate shares or an outright takeover offer.

“All they can do right now is consider,” said Lee Hyung Sil, an analyst at Shinyoung Securities Co. (001720) “They’ve expressed interest in Halla Climate in 2009, 2010, and 2011, but they just don’t have the means.”

Mando, which makes brakes and steering systems, only has about one-tenth the cash pile that an acquisition would probably cost, Lee said.

Hyundai Connection

Mando’s announcement comes at a time the nation’s family- run industrial groups, known as the chaebol, face mounting scrutiny. Lawmakers are proposing legislation that would threaten to weaken the control of founding families, including Halla Group and Hyundai Motor Group -- run by the Halla Group chairman’s cousin Chung Mong Koo.

“Chairman Chung has been slowly putting back the Halla Group that was, before the bankruptcy,” Lee Sang Hyun, an analyst at NH Investment & Securities Co. (016420) said by phone. “Also, owning Halla Climate makes sense as the company has been profitable and will give Halla Group a lead in automotive air control equipment sales.”

Deutsche Bank AG analysts wrote earlier this month Visteon will probably either sell its holdings in Halla to Mando or be acquired by Mando.

Visteon, the U.S. auto-parts maker that was spun off from Ford Motor Co. (F) in 2000, in July failed in an attempt to buy the remaining 30 percent of Halla Climate, which makes automotive air conditioners. South Korea’s National Pension Service, which owns 8.1 percent of Halla, rejected the U.S. company’s offer and reached a preliminary agreement to give Mando the preferred bidder status for the fund’s stake.

Bankers Talk

Visteon in July also ended an agreement to sell the majority of its interiors business to its joint venture with Huayu Automotive Systems Co. (600741)

The Korea Economic Daily earlier reported that Mando may seek to buy Halla Climate shares, citing unidentified investment bankers. Halla Group decided to make an offer after Visteon’s chief executive officer resigned earlier this month, according to the report. Though Mando initially considered taking over Visteon, it decided to pursue the purchase of the Halla Climate shares instead, the newspaper reported.

Calls to Annouk Ruffo-Leduc, a spokesman for Visteon in the Asia Pacific region, weren’t immediately answered.

Visteon Chief Executive Officer Don Stebbins resigned on Aug. 10 and the company’s board installed Tim Leuliette as interim chairman, president and CEO. Visteon, since exiting bankruptcy in 2010, has been shedding lower-margin revenue in vehicle interiors and lighting to focus on faster-growing operations in Asia.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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