The biggest car manufacturer in South Korea – Hyundai Motor Co. managed to beat a bid by fellow South Korean company Samsung Electronics Co. for a real estate located in Seouls Gangnam district. At KRW10.6 trillion ($10 billion), Hyundais bid is three times bigger than the assessed value of the property. Shares closed more than 9% lower as investors disagreed with the companys decision to buy the plot, instead of investing in R&D or dividend payouts.
“We deem our bidding price for the Gangnam site to be reasonable given the need to build a global business control tower and the future value of the land,” said a spokesman for Hyundai Motor for the Wall Street Journal.
The winning bid for the 79 342 square-meter real estate was made by Hyundai and its affiliates Kia Motors Corp. and Hyundai Mobis Co. The seller, Korea Electric Power Corp., sold the location of its headquarters because it is relocating to the south part of the country as part of a government regional development plan.
Hyundai managed to outbid not only Samsung, but also 11 other bidders for the site of state-run Kepcos headquarters. The group, which included Hyundai and its affiliates, paid three times the assessed value of the site. The car manufacturer said that it intends to relocate its headquarters and will house about 30 of its 50 divisions. Hyundai also shared that it intends to build a hotel and a car theme park there.
As reported by the Financial Times, Ko Tae-bong, auto analyst at HI Investment & Securities commented: “The bid price is excessive, which is incomprehensible to investors. Investors had expected Hyundai to use most of its surplus cash for constructive things such as raising dividends or R&D spending. But they are angry to see the group burn cash like this to buy a single property.”
Hyundai Motor Co. slid 9.17% on Thursday in Seoul to close at KRW198 000 per share, marking a one-year change of -22.81%. The company is valued at KRW57.85 trillion. According to the Financial Times, the 32 analysts offering 12-month price targets for Hyundai Motor Co. have a median target of KRW290 000, with a high estimate of KRW330 000 and a low estimate of KRW251 000. The median estimate represents a 33.03% increase from previous close of KRW218 000.
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