Mando Corp., the biggest unit of South Korea’s Halla Group, tumbled in Seoul trading after its plan to split into two raised investor concerns that the company is preparing to buy more shares of affiliates.
Mando, which announced the plan yesterday after the market close, plunged as much as the maximum 15 percent and traded at 117,500 won, down 13 percent, as of 9:50 a.m. in Seoul trading. Halla Corp., Mando’s largest shareholder, fell 1.4 percent to 6,180 won, while the benchmark Kospi index slid 0.3 percent.
Macquarie Group Ltd. cut its rating on Mando’s stock and BNP Paribas SA (BNP) said the move will probably drain value for minority shareholders. The announcement comes a year after Mando’s bailout of a construction affiliate drew opposition from investors including Midas International Asset Management Ltd. and Truston Asset Management Co.
“This plan could also be a way to inject cash into its largest shareholder, Halla Corp.,” James Yoon, a Seoul-based analyst at BNP Paribas, wrote in a note today. “We believe this action would result in a reduction of Mando’s corporate value due to the loss of cash.”
Mando will split into two. One company, Halla Holdings Corp., will focus on investments, while the other, Mando Corp. (060980), will continue to make auto parts, according to a regulatory filing yesterday.
The new Mando will take 70 percent of the current company’s assets and 52 percent of capital, according to the filing. Existing stakeholders will be given 0.52 of a share of Mando and 0.48 of Halla Holdings for each share they own.
Mando will hold a shareholders’ meeting on July 28 to get approval, and plans to split on Sept. 1, the company said. Trading will be halted from Aug. 28 to the day before the re-listing of the two companies’ shares, scheduled for Oct. 6.
In April 2013, Mando bought 378.5 billion won ($358 million) of new shares in wholly owned affiliate Meister Inc., which in turn invested 338.5 billion won in Halla Corp., then called Halla Engineering & Construction Corp. (014790) The bailout of the group’s unprofitable construction unit at the time sent Mando’s stock tumbling to a record low.
“This increases the uncertainties of the company’s corporate structure,” Yim Eun Young, an analyst at Samsung Securities Co. who has a hold rating on the stock, said in a report today. “There is high possibility that shareholders will interpret this as a deal to increase the majority shareholder’s control over the company.”
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