Hyundai Motor to merge steel subsidiaries

Hyundai Motor plans to merge its two steelmaking subsidiaries Hyundai Steel and Hyundai Hysco next month. Both companies will hold meetings of directors and shareholders to approve the deal. The combined structure will have an annual production capacity of 30 million tonnes of steel products, making it one of the 10 largest steel companies in the world and creating problems for the domestic POSCO, the fifth largest steel company in the world in terms of sales.

Hyundai Steel's capacity is 24 million tons per year. The deal is expected to boost Hyundai's overseas steel product sales, given that Hysco has sales centers and offices in China, Europe, the United States, Russia and India. The firm is building a new sales center in Mexico. Hyundai Steel earned most of its profits from sales of Hyundai Motor and Kia Motors. According to analysts, the main shareholders of the two firms will support the merger. Hyundai Steel's largest shareholder is Kia Motors (19.78 percent) and Hysco's largest shareholder is Hyundai Motor (29.37 percent). Kia Motors is second with 15.65 percent.

A Hyundai Steel spokesman said the merger will be done in such a way that Hyundai Steel will take over Hysco through the stock exchanges. Market experts believe the merger is related to Hyundai's ambitious goal of becoming the world's premier supplier of automotive and other industrial steel products. In line with this strategy, Hyundai Steel acquired the Dongbu Group's facility in October, which specializes in engine parts for ships and petrochemical refining.

Hyundai Steel and Hyundai Hysco reported strong operating margins last year. Hyundai Steel shares rose 2,700 won, or 3.7 percent, while Hyundai Hysco rose 4,000 won, or 6.6 percent.