Billionaire Schindler Holding AG (SCHP) Chairman Alfred Schindler said Hyundai Elevator Co. (017800) management reneged on a provisional agreement to sell most of the company, forcing him to file lawsuits to protect his investment.
Hyundai Elevator Chairwoman Hyun Jeong Eun and her mother signed a letter of intent in 2004 to sell the company’s elevator business to the Swiss elevator-maker, Schindler said at a roundtable event in Seoul. About five years later, Hyundai Elevator told Schindler, its second-largest shareholder, that the company wouldn’t be sold, according to Alfred Schindler.
Schindler said he can imagine Hyundai returning to negotiations based on the letter of intent, though it would be “quite complex and very late in timing.” The letter of intent isn’t legally binding and was dismissed in October 2005 under the agreement of both parties, Hyundai Elevator said in an e-mailed response to Bloomberg News. It said it has no intention of selling the elevator business.
“We kept silence on this for 10 years; I never talked to the Swiss or Korean governments or press,” Schindler said, adding that he can now talk about the pact as details are open to a South Korean court and because the latest share sale plan at Hyundai is hard to accept.
Schindler is unlikely to sell its 35 percent stake in the short term as it would weigh on Hyundai Elevator’s stock price, Alfred Schindler said.
A local court last month rejected Schindler’s request to stop a planned 110.9 billion-won ($100 million) capital increase in June that Schindler said will be at a 25 percent discount and excluding current investors. Hyundai agreed to notify Schindler if it decides to separate its elevator business.
The letter of intent sheds new light on Schindler’s attempts to access the accounts of its Korean partner, which have been blocked in local courts on the grounds that Schindler is a competitor with ulterior motives. Schindler is also attempting to end the Ichon, South Korea-based company’s use of derivatives linked to an unprofitable shipping affiliate, Hyundai Merchant Marine Co. (011200)
Hyundai Group controls 45 percent of Hyundai Elevator, according to Schindler. Schindler doesn’t have any directors on Hyundai Elevator’s board.
Hyundai Group, headed by Chairwoman Hyun Jeong Eun, is separate from Hyundai Motor Group, which is run by Chung Mong Koo, the elder brother of Hyun’s late husband.
Schindler says Hyundai’s Elevator’s management decisions are putting his investment at risk.
“The company is losing value and destroying value for the past three years, and as a shareholder we have to defend our investment,” he said. “We have several hundreds of millions on the table.”
Schindler shares traded 0.4 percent higher at 141.7 francs as of 12:39 p.m. in Zurich. Hyundai Elevator declined 0.9 percent to 81,200 won.
While Hyundai Elevator has increased sales every year since Schindler took a stake in 2006, it has made losses in two of the last three years. That’s partly because of the derivative contracts that help Hyundai Group control Hyundai Merchant by supporting allied shareholders.
Hyundai Elevator incurred a 195.3 billion-won loss from stock derivatives in the first quarter, according to a regulatory filing on May 10.
Hyun and Schindler cemented their relationship with personal gatherings, Schindler said. The Swiss industrialist and his wife were entertained by Hyun at Mount Geumgang in North Korea in 2007, while Hyun and her daughters were invited to Switzerland, he said.
In 2010, Hyundai Group failed in an attempt to buy a 35 percent stake in Hyundai Engineering & Construction Co., even after offering almost $5 billion, more than double the market price.
At the time, Schindler advised Hyun to not participate in the deal as analysis showed Hyundai did not have enough money to make the promised payment. Instead Schindler offered $600 million to help “disentangle” and rebuild Hyundai Group’s complex corporate structure, which he told Hyun was unsustainable, Schindler said.
“However, I never got an answer,” Schindler said. “There has been no communication” between the companies since then, the chairman said.
Schindler deliberately kept its own elevator operations in Korea to a minimum in order to avoid antitrust difficulties if it acquired Hyundai Elevator.
The Swiss elevator heir expanded his family company with acquisitions throughout the 1990s from Russia to Brazil to prevent it from being taken over like rival Otis Elevator, which was swallowed by United Technologies Corp. (UTX) All of his takeovers were friendly, Schindler said,
Schindler said there aren’t many alternatives left for his Korean investment. Aside from waiting for Hyundai Elevator to return to negotiations, he said that Korean government intervention or writing off the 35 percent stake are options.
“I have not the faintest idea what will happen, but I can guarantee that we are not a hostile company,” he said.
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