Schindler Holding AG, a leading global moving solutions provider, said Monday it will boycott Hyundai Elevator Co.'s decision to seek paid-in capital increase that it says does nothing to improve the situation of the elevator company.
The announcement follows Schindler's compensation lawsuit last month against the South Korean company, claiming financial damages from Hyundai Elevator's derivatives contract. Schindler claims that the contract was a calculated strategy to allow Hyundai
Group's chairwoman, Hyun Jeong-eun, keep control of the group's shipping company Hyundai Merchant Marines.
"Past two moves to increase capital have done nothing for the company and can only be seen as action taken by top managers to help Hyun Jeong-eun's hold on Hyundai Merchant Marines," Yvonne Park, Schindler's local communications representative, said in a meeting with South Korean media.
She said that based on this decision, the Swiss-based company will sell off its preemptive rights in the capital increase with consideration.
Park added that Hyundai Elevator had arranged 17 separate derivative deals that cost the company and shareholders considerable losses in the past few years.
The representative claimed that Schindler has effectively been kept out of any decision making process and had no say in the management of the company in the past, despite being the second-largest shareholder in the elevator company.
She said issues being raised by the holding company are legitimate concerns for any shareholder who witnessed the company paying 10 billion won to 30 billion won ($27.7 million) every year in interest for the derivative deals, and had to stand by as share prices plunged, causing 400 to 500 billion won in losses. At one time, Hyundai Elevator shares hit 190,000 won. It currently trades at around 45,000 won or less.
Schindler, which previously controlled a 35 percent stake in the South Korean company, now has a 30.89 percent stake. If it opts not to take part in the capital increase, its share can fall to around 21 percent.
Hyundai Elevator said it will issue 6 million new shares worth more than 190 billion won later this month, as a way to generate fresh cash to improve its financial situation that it blames on a slowdown in the construction market. The company has some 13
million shares on the market and can have a maximum 20 million shares under local regulatory rules.
It suggests that Schindler's opposition and its recent compensation lawsuit are part of a hostile takeover ploy.
Park pointed out that Schindler, a family-run company with a history of 140 years, generates some 10 to 11 trillion won in sales annually and reports an operating profit of 1 trillion won.
Last year, it suffered 260 billion won in losses because of Hyundai Elevator, she said.
"Such circumstances need to be explained to shareholders when the company holds a meeting of investors later this week, Park said.
On allegations that Schindler is trying to take over Hyundai Elevator, Hwang Myung-ju, legal adviser to the Swiss company, emphasized the holding company has no such plan.
"Schindler's chief asked me to clarify allegations of hostile takeover," he said.
The lawyer said that the lawsuit actually calls for Hyun, Hyundai Elevator CEO Martin Han and two other managers to pay back the South Korean company, not Schindler, for losses caused by their actions.
Asked about what future actions that Schindler may take, Hwang said no other lawsuit is being considered. He also said no decision has been reached on the holding company's ties with Hyundai Elevator. (Yonhap News)