Hyundai’s £6bn headquarter deal confirmed

<p>Hyundai is spending a record £6.2 billion for its new headquarters in Seoul.</p>

The board members of Hyundai Motor and two of its affiliates agreed to pay 10.55 trillion Korean won (£6.2 billion) for a plot of land to build their new headquarters in Seoul, it was announced today (September 26th).

The company, along with Kia Motors Corp and Hyundai Mobis Co, is spending more than triple the assessed value. Hyundai Motor will pay 55 per cent of the price, followed by Hyundai Mobis Co Ltd with 25 percent and Kia Motors Corp with 20 per cent, the companies said.

This has caused concerns among investors as it exceeds Hyundai Motor’s entire 2013 earnings. Ko Tae-bong, auto analyst at HI Investment & Securities told Reuters: "This deal is going to take a huge chunk out of Hyundai's vault, and dipping their hands into a cash stash that could have otherwise been used for higher dividend payouts and R&D is going to aggravate many investors, especially foreigners."

About 11.6 trillion won have been wiped of the market values of the companies since the purchase was announced last week, according to Reuters.

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

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

Labour union employees voted today to extend a strike into next week in a show of disapproval of the purchase of a land parcel.

The 47,000 union members of the auto maker's 60,000-strong work force stopped work for four hours, and planned further strikes this week after talks with management on wages and benefits broke down, said a union spokesman. 

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.