SEOUL, KOREA - The consortium of Hyundai Motor, Kia Motors, and Hyundai Mobis was finally selected as the successful bidder to acquire the former Korea Electric Power Corp. headquarters site in Seoul's Gangnam. As the consortium decided to pay 10.55 trillion won for the property, more than three times of the appraisal value last year, an analyst said it was certainly detrimental to the stock prices but the impact would be limited in the long run.

 

Korea Investment & Securities analyst Suh Sung-moon said on September 18, "Hyundai Motor Group participated in the deal by forming a consortium of Hyundai Motor, Kia Motors, and Hyundai Mobis. Assuming that the portion of Hyundai Motor is 50 percent, its burden would be 5,275 billion won."

 

As of the end of the second quarter, the auto division of Hyundai Motor has a net cash balance of 17.4 trillion won. Meanwhile, Hyundai Mobis and Kia Motors hold 3.8 trillion won and 2.7 trillion won in cash, respectively. Based on this, the analyst said the latest transaction would have minimal impact on the companies' bottom line.

 

In the long run, he added, the rise in intangible value of the property would more than make up for the hefty price tag for the site. He said, "In 2000 when Hyundai Motor Group moved to the main office in Yangjae-dong in Gangnam, the combined sale of Hyundai and Kia was 2.53 million a year. But the figure tripled in 2013 to 7.55 million, with their combined rank in the world moved up to No. 5 from No. 10 13 years ago."

 

As the group's size got bigger, it urgently needed an integrated corporate building to play the role of a control tower. With the newly built global business tower, the group will be able to raise its corporate brand value. Currently the brand value of Hyundai and Kia is $13.7 billion ($9.0 billion for Hyundai and $4.7 billion for Kia), much lower than that of Toyota ($35.3 billion) and Honda ($18.5 billion).