Posco, the fourth largest steelmaker around the globe, and the Hyundai Heavy Industries Co., the biggest shipyard, will buy stakes in each other to boost cooperation and strengthen defenses against hostile bids, Posco said yesterday.
The Pohang-based steelmaker is expected to spend 346.6 billion won which is equivalent to US$373 million so as to acquire a 1.9 percent stake in Hyundai Heavy held by the Hyundai Mipo Dockyard Co, Posco said in a regulatory filing. In return, Hyundai Mipo will purchase about 872,000 Posco shares.
Lee Ku Taek, the Posco chief executive officer, will be joining global rivals in boosting defenses to ensure the company's independence as industry consolidation accelerates. The company said last month that 41 percent of its shares were owned by so-called friendly investors which already include the Nippon Steel Corp.
“The stake purchases are small, but they will contribute to Posco's friendly shareholdings,'' said Kim Gyung Jung, an analyst at Samsung Securities Co in Seoul. The deals are “good for Posco's stock as there will be more demand for it.”
In 2006, the Mittal Steel Co. purchased Arcelor SA for US$38.3 billion so as to form the Arcelor Mittal - the largest steel maker worldwide. The move is done to cope with the growing global industry as well as to improve bargaining power with suppliers and customers. Additionally, India's Tata Steel Ltd purchased Corus Group Plc for $12 billion in January.
Posco shares, the second most valuable stock on the benchmark Kospi index, gained 2,500 won or 0.6 percent to 400,000 won Thursday. That matched the record closing on April 24. The announcements came after the market's close at three in the afternoon.
Posco, which is 59 percent owned by overseas investors, counts Nippon Steel, the second largest metalmaker worldwide, as its biggest shareholder and ally. On October 20, Nippon Steel and Posco said they would spend more than $900 million to increase stakes in each other. The Japanese steel maker said last month that it owned a five percent stake in Posco.
"We are in talks," Posco spokeswoman Ko Min Jin said today, responding to report in the Korea Economic Daily that Posco and the world's largest shipyard may take one percent stakes in each other. One percent stake in Posco is worth about 348 billion won or 375 million dollars. An equivalent stake in Hyundai Heavy is worth approximately 185 billion won. Hyundai cold air intake must have been blowing positive vibes in favor of the automaker.
Asian steelmakers like Posco and Nippon Steel are speeding up to enhance their market values and take defensive strategies against possible takeovers after Mittal Steel Co.'s $38.3 billion takeover this year of its biggest competitor, Arcelor SA. Posco's share price has increased recently on speculation that the steelmaker, which is owned 60 percent by foreign investors, may become a prime target for a hostile takeover attempt by Mittal Steel.
Last year, the two steelmakers said they would spend more than $900 million to increase stakes in each other. South Korea's National Pension Fund, the country's largest institutional investor, owns 2.9 percent of Posco. In December, billionaire investor Warren Buffett's Berkshire Hathaway Inc. also disclosed it owns a 4 percent share in Posco.
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