Hyundai will take over Kia and Asia Motors

Hyundai will take over Kia and Asia Motors

SEOUL (Reuters): South Korea's Hyundai Motor Co on Tuesday agreed to acquire a 51 percent stake each in Kia Motors Corp and Asia Motors Co for 1.18 trillion won (US$951 million).

Analysts said the deal would allow Hyundai to gain stronger ground in the country's car industry but would force loss-making Samsung Motors out of the business.

"The domestic car industry will transform into the Big Two -- Hyundai and Daewoo Motor -- now that Kia is acquired," said Suh Sung-moon, a car analyst at Daewoo Securities.

The takeover of Kia and Asia would make Hyundai the world's 10th biggest carmaker with a capacity of 2.5 million units.

Hyundai Motor chairman Chung Mong-gyu and Kia chairman Yoo Chong-yul signed the contract with payment due in late March.

Hyundai is paying 841.5 billion won for its stake in Kia Motors and 336.6 billion for Asia Motors.

Hyundai Motor, the country's largest carmaker, won an international auction to take over Kia and Asia in October.

Chung said his company, the flagship unit of the Hyundai Group, would soon reveal the business normalization plans for the troubled carmakers.

"Our inspection team and a foreign consulting firm are currently working on a normalization plan," Chung told reporters at the signing ceremony. "We will announce the plan in the near future."

Chung said Hyundai has not been actively seeking foreign investments because the formal agreement had not been signed.

"But from now on we will work aggressively to lure foreign investments," he said.

Chung said several other member firms of the group would take part in the Kia deal.

Kia and Asia Motors, the core units of the now-defunct Kia Group, were put under court receivership when they could no longer service their more than $10 billion in debts.

Company chairman Yoo, the court-appointed administrator for Kia and Asia, said he would help Hyundai normalize Kia as soon as possible.

Kia's production returned to normal on Tuesday after some assembly lines were halted last week, a Kia spokesman said.

Lee Keun-young, president of Kia's main creditor Korea Development Bank, said Hyundai was required to submit repayment schedules for Kia and Asia's debt this week. The schedules will be subject to approval by Kia creditors later this month.

If approved by creditors, payment was expected to be made in late March next year.

Last Thursday, it was announced creditors had agreed to write off an additional 219.4 billion won of Asia's debt, bringing the total write-off offered to Hyundai on the two firms to 7.39 trillion. The combined debt of Kia and Asia stood at 13.89 trillion won as of early November, creditors said.