Hyundai Motor wins bid for KEPCO land with $10 billion

Hyundai Motor Group becomes the new owner of Korea Electric Power Corp. (KEPCO) headquarter land by offering 10.55 trillion won (approximately 10.14 billion U.S. dollars). The KEPCO’s land has been regarded as the most coveted land available for development in Gangnam area of Seoul.

KEPCO announced on Thursday that the Hyundai Motor Group consortium won the bid for its headquarter land in Yeongdongdaero of Gangnam District in Seoul. Hyundai’s bidding price was much higher-than-expected 10.55 trillion won, three times of the land’s estimated worth of 3.33 trillion won (3.2 billion dollars). Considering the land size of 79,342 square meters, the price per 3.3 square meters reaches 438.8 million won (422,126 dollars). Adding the donation for the Seoul city government to this amount, the land price per 3.3 square meters jumps up to 500 million- 600 million won (481,000-577,200 dollars). The Seoul city government sees that the value worth 40 percent of the KEPCO land price must be donated to the public in the form of land or infrastructure.

With forecasts coming out that the cost for purchase and development of the land may exceed 15 trillion won (14.43 billion dollars), concerns grow in the stock market that Hyundai Motor Group may fall to "the winner’s curse."

Responding to such concerns, the share price of Hyundai Motor fell down Thursday by 9.17 percent to 198,000 won (190.48 dollars) from the previous day. Other subsidiaries that participated in the consortium also showed a plunge in the stock prices - Kia Motors falling down by 7.80 percent and Hyundai Mobis decreased by 7.89 percent. The three companies lost 8.33 trillion won (8.02 billion dollars) in market price just for one day.

However, Hyundai Motor Group said, “The bid did not aim for mid and short term profits. The group has acquired the land to build a business center to be used permanently in order to house some 40 affiliates for global management. The highest leadership foresees more than 100 years ahead with commitment and insight.”

Reportedly, 13 bidders joined the bidding but 11 bidders were disqualified and only two candidates, Hyundai Motor Group Consortium and Samsung Electronics, were left. Samsung Electronics is reported to have offered top 4 trillion won (3.85 billion dollars).

Meanwhile, KEPCO plans to spend the land price to reduce the debt and relocate its headquarter to Naju in South Jeolla Province. KEPCO’s debt is estimated to be approximately 57.62 trillion won (55.43 billion dollars) as of June, and its stock price went up by 5.82 percent on Thursday.