South Korean carmakers Hyundai Motor Co. and Kia Motors Corp. will repurchase a combined KRW670 billion ($616 million) of stock after their pricey acquisition of a property in Seoul prompted a sell-off of shares. Hyundai will buy back 2.2 million common shares and 652,019 preferred shares, while Kia will repurchase 4.05 million common shares, according to separate regulatory filings by the carmakers.
They said that the buybacks will be completed by Feb. 11, 2014 to “stabilize share prices and improve shareholder value.” The disclosure came nearly two months after Hyundai, Kia and Hyundai Mobis Co. won an auction for prime property in Seoul’s central Gangnam district. The companies offered triple the assessed price.
Heo Pil Seok, chief executive of Midas International Asset Management Ltd., remarked that the announcement will help ease worries that Hyundai may cut dividend payout. He added that the move “meaningful” since both companies have taken a step to improve shareholder value.
He noted that the buyback will definitely improve investor sentiment and hike market expectation for a surge in dividend.
In October, on behalf of the consortium, Hyundai said that the three companies won’t issue debt and will use cash to finance the land purchase priced at KRW10.6 trillion – dampening expectations for an increase in dividend payouts.
In a bid to ease those concerns, Hyundai Chief Financial Officer Lee Won Hee and Kia’s then-CFO and now co-chief executive Park Han Woo said last month that the companies are mulling an interim dividend payout.