Hyundai Card stake sale hinging on exit strategy: sources

[THE INVESTOR] Whether investors have access to a viable exit solution in Hyundai Card will become a critical issue in GE Capital‘s plans to sell its 43 percent share in the Korean credit card firm.

GE is currently looking to sign a deal by September. Potential bidders, such as Pacific Alliance Group, Affinity Equity Partners and H&Q Asia Pacific Korea have launched individual due diligences into Hyundai Card.

The bidders -- as they are all financial investors -- are reportedly pondering due to a lack of efficient exit strategies, such as an IPO or put options. 

“For financial investors, it’s a big issue whether there is a concrete exit strategy in sight for Hyundai Card, meaning if it seems difficult, they will have a hard time deciding on committing,” said one equity firm executive on the condition of anonymity.

This may also make it difficult for GE Capital to sell the entire stake – estimated to be worth around 700 billion won (US$ 623.49 million) – at one go, he said, especially since a bidder attaining more than 10 percent of the stake will have to face government assessment as a controlling shareholder.

Further complicating the issue is that GE Capital does not have a proper say in the exit strategy. Hyundai Motor Group, which is the largest shareholder, holds the reins, along with the Hyundai Card management. So far, the two parties have been mum regarding the stake sale.

GE Capital is a strategic investor in Hyundai Card, having partnered with Hyundai Motor Group in 2004 to acquire a 43.3 percent stake in Hyundai Capital for 620 billion won. In 2005, GE Capital acquired a 43 percent stake in Hyundai Card for 670 billion won.

The partnership between Hyundai Motor and GE Capital was terminated in 2014, which is why GE Capital is seeking to sell its stakes in Hyundai Capital and Hyundai Card. The stake in Hyundai Capital is expected to be acquired by Hyundai Motor.

By Kim Ji-hyun (jemmie@heraldcorp.com)