Hyundai and affiliates agree to $10-bn land deal

The boards of Hyundai Motor Co and two affiliates approved a 10.55 trillion won ($10 billion) land purchase that wiped out just as much off their market values due to mounting investor concerns, Bloomberg reported.

The nation's largest carmaker would pay 55 per cent of the total, followed by Hyundai Mobis Co with 25 per cent and Kia Motors Corp footing the rest, the companies said in statements today.

All three formed part of billionaire chairman Chung Mong Koo's automotive group, which planned to move its headquarters to the prime Seoul location and develop the area into a tourist attraction rivaling Germany's Autostadt, or ''Car City.''

The loss that the three companies suffered amounted to 11.6 trillion won in market value following the state-run owner of the land announcing last week that the Hyundai Motor group offered triple the property's assessed value to win the auction.

The move led to downgrades for the carmaker and brought to the fore corporate governance concerns in a country dominated by family-run conglomerates, locally know as the chaebols.

According to Chae Yi Bai, a researcher at the Center for Good Corporate Governance and a shareholder activist in Seoul, the case showed the problems and the vulnerability of Hyundai Motor Group's corporate-governance structure.

There was no going back for Hyundai once chairman Chung said he wanted the property, regardless of opposition from the general public and Hyundai's investors.

Meanwhile, unionised employees, who made up the bulk of the companies' workforce, voted today to extend a strike into next week in a show of disapproval over the purchase that would be used to house a new headquarters, hotel and theme park complex, Reuters reported.

"Building an integrated control tower will enhance work efficiency and brand value," Hyundai Motor said in its regulatory filing today.

The Hyundai-led consortium, which beat Samsung Electronics to buy the plot in the capital's high-end Gangnam district, plans to ink the deal with the state-run Korea Electric Power Corp later today.

Shares of Hyundai Motor ended down 1.3 per cent at 187,000 won each today, their lowest level in 17 months. Kia Motors slipped 0.8 per cent, and Hyundai Mobis was up 0.6 per cent.

The $10-billion price-tag is equivalent to selling nearly half a million of Hyundai's flagship Sonata sedans, and nearly two years of combined wages for Hyundai's 63,099 employees in Korea, according to Reuters' calculation.