Hyundai Heavy Industries Holdings has agreed to sell its 17 percent stake in Hyundai Oilbank to Saudi Aramco for 1.4 trillion won ($1.2 billion), leaving the refiner more unlikely to opt for an initial public offering for the time being. 

Courtesy of Hyundai Oilbank

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According to a disclosure on April 15, Daegu-based HHI Holdings and Aramco have signed a sales and purchase agreement. Aramco will buy some 41,700 shares out of some 245,100 at 33,000 won per share. It may exercise a call option to buy an additional 2.9 percent stake at the same price.

This translates into a 10 percent discount for Aramco’s all-cash stock takeover. In a disclosure in Jan., HHI Holdings said it plans to sell a 19.9 percent stake at up to 1.8 trillion won. But considering the dividends Aramco will get from Hyundai Oilbank, the discount will probably be at around 8 percent, Samsung Securities analyst Han Young-soo wrote in a memo on April 16.

Given the time it would take to close the stock transaction deal and HHI Holding’s sales proceeds from it, HHI Group appears to have lost appetite for an immediate IPO.

Hyundai Oilbank withdrew plans to go public in 2018, although the IPO was projected to fetch at least 2 trillion won. HHI Holdings had planned to use the IPO proceeds to improve its financial health. Its debt-to-equity ratio came to some 121.2 percent, according to its consolidated financial report for 2018.

There are speculations that HHI Group will use the proceeds -- either from the pre-IPO deal with Aramco or from IPO -- for its 2.1 trillion won purchase of Daewoo Shipbuilding & Marine Engineering from creditors led by the state-led Korea Development Bank. HHI Holdings’ cash reserve came to some 1.1 trillion won as of end-2018.

A Hyundai Oilbank spokesperson said the company has yet to embark on the IPO process. HHI Holdings could not be immediately reached for comments.

The holding firm, formerly known as Hyundai Robotics, is at the apex of the HHI Group’s holding structure and owns key affiliates including HHI.

Aramco will become the second-largest shareholder of Hyundai Oilbank, once the transaction is completed. HHI Holdings is currently the largest shareholder of Hyundai Oilbank, owning 91.13 percent. HHI-affiliated nonprofit organization Asan Nanum Foundation holds 0.25 percent.

By Son Ji-hyoung (consnow@heraldcorp.com)