Hyundai Engineering drops IPO plan on stock market weakness

Hyundai Engineering Co., the plant engineering and construction unit of South Korea’s Hyundai Motor Group, dropped a listing plan to raise up to $995 million due to tepid demand from institutional investors.

A tumble in global stock markets and the recent collapse of an apartment building under construction in the country soured investor sentiment on the sector overall, investment banking industry sources said.

Hyundai Engineering on Friday announced the decision in a filing to a financial regulator, citing challenges in receiving a “proper assessment” of the company’s value.

The company had planned to raise up to 1.2 trillion won ($994.8 million) by floating 16 million shares at a price between 57,900 won and 75,700 won apiece on Korea’s main bourse.

It aimed to sell 12 million shares, 75% of the total, to institutional investors during the IPO’s bookbuilding on Jan. 25-26. But it was just tens of times oversubscribed, far weaker than institutional demand for Krafton Inc. last year. The South Korean game developer’s bookbuilding 243 times oversubscribed, the lowest for listings of major companies in 2021.

“Some institutions had proposed the top end of the IPO prices on the first bookbuilding day of Jan. 25, but most of them canceled participation on the next day,” said an IB industry source. “Volatile stock markets with the Kospi down below the 2,700 level had a huge impact.”

With the withdrawal, Hyundai Motor Group Chairman Chung Euisun and honorary Chairman Chung Mong-koo postponed sales of their shares of Hyundai Engineering. They had planned to raise up to 500 billion won through the sales.

Last year, some companies such as Hyundai Oilbank Co. and SK Lubricants Co. dropped listing plans due to sluggish demand from institutional investors.

GIVES UP GARBAGE TREATMENT COMPANY ACQUISITION

Separately, Hyundai Engineering quit the race to buy a local garbage treatment company, according to IB industry sources.

Hyundai Engineering in last November participated in preliminary bidding for KG Eco Technology Services Co.'s (KG ETS) environmental energy and new materials businesses as the group aims to develop eco-friendly sectors as its future growth engines.

But Hyundai Engineering was known to have ceased due diligence after being selected as a shortlisted bidder, giving up the acquisition.

ECORBIT, the country’s top waste management company, as well as South Korea’s E&F Private Equity, SKS Private Equity and VL Investment joined the final bidding conducted by KG Group, KGETS’ top shareholder.

It hoped to sell the businesses at more than 500 billion won, given the sector’s stability and growth potential. KG ETS posted 153.9 billion won in sales and 19 billion won of operating profit on a consolidated basis in 2020.

Write to A-Young Yoon and Chae-Yeon Kim at youngmoney@hankyung.com
Jongwoo Cheon edited this article.