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Schindler lists gripes with Korea partner

PUBLISHED : Thursday, 13 December, 2012, 3:17pm
UPDATED : Thursday, 13 December, 2012, 3:26pm

Billionaire Schindler Holding chairman Alfred Schindler blasted Hyundai Elevator for denying him access to its books, as he wages a legal battle to protect his 35 per cent investment in the Korean company.

The Swiss elevator-maker is trying to overturn a ban on access to Hyundai Elevator’s accounts, after a Korean court blocked a review on the grounds that Schindler is a competitor with ulterior motives. Schindler is also attempting to end the South Korean company’s use of derivatives linked to an unprofitable shipping affiliate, Hyundai Merchant Marine.

“We believe the behaviour of Hyundai Elevator as measured by international standards of corporate governance is plainly unacceptable,” Alfred Schindler said in an interview, a rare public appearance since he stepped down as chief executive officer of the Swiss company last year.

The billionaire is intervening to personally resolve the spat and will hold a press conference in Korea next year about Schindler’s investment. The elevator heir, 63, started building a stake in the Korean firm in 2006 to participate in Asia’s construction boom.

Schindler is contending with Hyundai Group, which controls 47 per cent of Hyundai Elevator, according to the Korean company’s third-quarter results. Schindler doesn’t have any directors on Hyundai Elevator’s board.

The Korean elevator-maker is also a key part of a web of cross-shareholdings linking Hyundai Group’s various different businesses. South Korea’s so-called chaebols often control units through interlocking stakes.

We believe the behaviour of Hyundai Elevator as measured by international standards of corporate governance is plainly unacceptable
Billionaire Schindler Holding chairman Alfred Schindler

Hyundai Group said it’s wary of Schindler’s request for more information. The legal disputes have led to speculation that Schindler wants control of Hyundai Elevator, which is Korea’s dominant company in the industry.

Hyundai Elevator has jumped 34 per cent in Seoul trading since November 30, when it announced the second Schindler lawsuit. In that case, the Swiss company is seeking to block investments that Hyundai Elevator uses to help keep control of Hyundai Merchant. The ship operator is Hyundai Group’s biggest business.

“We are suspicious whether the lawsuits come from their underlying interest in management,” the group said in reply to Bloomberg News questions.

Hyundai Group, headed by chairwoman Hyun Jeong Eun, is separate from Hyundai Motor, which is run by the brother of Hyun’s late husband.

Hyundai Elevator stock has dropped 22 per cent this year.

“The second lawsuit has triggered speculation that Schindler may be interested in taking part in management,” said Go Hyun Soo, a Seoul-based analyst at Korea Investors Service, which has an investment grade credit rating on the Korean elevator-maker. “Still, Schindler may be trying to protect its investment in Hyundai Elevator by stopping management from using assets to maintain control of Hyundai Group units.”

Chairman Schindler said “we are just holding it, that’s all,” when asked whether his company planned to raise its stake in Hyundai Elevator or to seek control. He declined to comment on whether he wanted the Korean company to sell its direct stake in Hyundai Merchant. The elevator-maker owned 24 per cent of the Seoul-based ship operator as Oct. 16, according to a Hyundai Merchant filing.

“The minority shareholder of the smaller entity pays for this ownership-risk,” Alfred Schindler said.

Failure to make good on Hyundai would be a stain on Schindler’s expansion that has helped lift the share price more than tenfold since 1989 and made Alfred Schindler one of Switzerland’s richest executives.

Schindler forged ahead with acquisitions throughout the 1990s from Russia to Brazil, dominating markets to prevent his family-firm from being taken over like rival Otis Elevator which was swallowed by United Technologies.

The Schindler and Bonnard families, along with related parties, hold 70 per cent of the voting rights in Schindler Holding, which is worth 15.5 billion Swiss francs (US$16.6 billion).

While Hyundai Elevator has increased sales every year since the original Schindler deal, it has made losses in two of the last three years. That’s partly because of derivative contracts that help Hyundai Group control Hyundai Merchant by supporting allied shareholders.

Under the derivatives, Hyundai Elevator pays out when Hyundai Merchant’s stock value falls, Alfred Schindler said. Any profits from a price rise are shared, he said. The shipping company has plunged 37 per cent since the end of 2010 amid a collapse in freight rates.

Schindler’s request for access “goes beyond simple accounting,” the chairman said, adding that he expects to have further information about the case in mid-January.

“Right now we have no say at all,” he said. “We have no influence whatsoever.”

 

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17 Sep 2011 - 12:00am

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