Will Hyundai chief hit the jackpot again?

Hyundai Motor Group chairman Chung Mong-koo raised eyebrows among stock market investors and analysts on Thursday when a Hyundai Motor-led consortium won its bid for Korean Electric Power Corp.’s office property in the lucrative Gangnam district of Seoul, offering 10.5 trillion won ($10 billion), about three times what KEPCO had initially expected.

According to multiple sources, behind the big bet was the chairman’s strong will to win the deal. One of the sources said Chung orchestrated the 10.5 trillion won-deal, writing down the price on a piece of paper himself when other executives brought much smaller numbers. 

“The 10.5 trillion won (bid) may sound insane to many onlookers but Chung may have a different idea. He is known to be daring and persistent in what he wants. He doesn’t really care what others think of his decisions, and that has been the key to his success,” a business pundit told The Korea Herald on condition of anonymity.

Looking back, this isn’t the first time Chung, the eldest remaining son of Hyundai Group founder Chung Ju-yung, has made a daunting bid that was understood by few people at the time.

In 1998, he led the acquisition of then-bankrupt Kia Motor, despite huge opposition from the management. The 7 trillion won deal bore fruit less than a year after the purchase.

In 1999, Hyundai gave out a “10 year- or 100,000 mile-warranty” for all of its products sold in the U.S. Alongside the construction of a manufacturing plant in Alabama, the risky marketing move helped the automaker grab 4.6 percent of the U.S. automobile market as of 2013.

Other noted investments include the establishment of the nation’s second integrated steel mill with a blast furnace, after the one built by POSCO, in 2006 with 9.9 trillion won investment. The auto giant chief also pushed for the takeover of Hyundai Engineering & Construction for 4.96 trillion in 2010.

“The company’s big bet on the KEPCO property was more than a real estate acquisition. Behind the decision was a blueprint for the next century for the world’s fifth-largest carmaker,’’ a company spokesman told The Korea Herald.

In stark contrast to Hyundai’s reaction, the stock price plummeted right after the news broke on Thursday, reflecting market analysts’ concerns about the carmaker’s future, as profit margins slid last year mainly because of a worsening external business environment.

“The aggregate stock value of three Hyundai affiliates joining the consortium dropped 8.41 trillion won after the purchase announcement, with Hyundai Motor’s falling the most at over 4.4 trillion won,” financial market researcher FnGuide said.

Brokerage firms downgraded or hinted at adjusting the target or appropriate share prices of the three affiliates to reflect potential risks and opportunity costs.

“It will take a considerable time to see if the Hyundai chairman’s latest big bet will end up as a success story again or not,’’ the pundit said.

By Bae Ji-sook (baejisook@heraldcorp.com)