Hyundai’s decision to spend no less than $10 billion on a bid to acquire a prized property in Seoul for its next headquarters has sparked controversy among investors, fearing the spending could damage the company.
Now, the latest report coming from Reuters paints an even more complicate situation, as four board members of the automaker – under condition of anonymity – said the deal was not even cleared with the members of the board. The record $10 billion deal was triggered by a bidding war with technology conglomerate Samsung and Hyundai ended up paying roughly three times the property’s appraised value.
Last week’s announcement of the record bid triggered a share drop in Hyundai Motor, Kia Motors and Hyundai Mobis, with shareholder value down no less than $8 billion – sparking protests among investors and renewed worries about South Korea’s conglomerates corporate governance, or chaebol.
“The price was top secret, so it was not something we discussed at the meeting,” said one board member. “The intangible benefits go beyond the appraisal price of the land.”
“The one very core element was missing, then, during the process,” said Park Yoo-kyung, a Hong Kong-based director specializing in corporate governance at Netherlands-based APG Asset Management. “That’s an amazing thing. It’s unbelievably negative. We are very angry.”
The Hyundai Motor Group, the fifth-largest automaker globally, was mulling the purchase of the 79,342 square meter land for a long time and media reports say the state-run Korea Electric Power – the seller of the site – was only offered around $4-$5 billion by the rival bidder, Samsung Electronics.