Hyundai Affiliate Innocean Falls on Seoul Tradin Debut

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Innocean Worldwide Inc., the advertising affiliate of Hyundai Motor Group, fell on the first day of trading in Seoul after raising 340 billion won ($297 million) in its initial share sale.

The stock declined 11 percent to 60,500 won at the close, down from the 68,000 won price in the initial public offering. The benchmark Kospi index dropped 0.5 percent.

Innocean’s share sale is part of a broader move by Chairman Chung Mong Koo and his family to restructure their ownership as sales cool at South Korea’s biggest car manufacturing group. The IPO reduced the combined holdings of the Chungs to under the 30 percent threshold required by new laws governing related-party deals, while raising about $180 million that could be used toward paying inheritance taxes.

Chung’s selling of his shares “is aimed at complying with new antitrust rules that took affect in February,” Hyundai commented in an e-mailed response to Bloomberg query.

About two-thirds of the 5 million shares offered in the IPO came from Hyundai scion Chung Eui Sun and his sister. After the IPO Chung will hold a 2 percent stake in Innocean, and his sister, about 28 percent.

Parliament revised fair-trade laws last year to allow the government to fine chaebol family members if affiliates in which they hold more than a 30 percent stake make a profit from transactions with other group companies. The regulation follows an earlier ban on the creation of new cross shareholdings.

Tighter Controls

Hyundai, like the nation’s biggest chaebol, Samsung Group, is preparing for a generational leadership transition from the patriarch Chung Mong Koo to his 44-year-old son, currently Hyundai Motor Co.’s vice chairman.

That wealth transfer is taking place amid tighter controls and growing activism against corporate practices perceived to harm minority shareholders, including the system of cross shareholdings that has allowed the owner families to control groups despite holding small minority stakes.

Family scions hoping to keep control of the groups also face high inheritance taxes. In the younger Chung’s case, selling all of his stakes in listed Hyundai affiliates may only just raise enough cash to cover the potential tax bill.

Chung raised 300 billion won in August when he sold a 30 percent stake in the then-unlisted Innocean, while at the IPO he offered 1.4 million shares, raising about 95 billion won.

Innocean will use 134 billion won from the IPO proceeds for “business purposes,” including expanding overseas offices, investing in new business opportunities, Innocean said in a regulatory filing.

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