[Featured Stocks] Hankook Tire and Hanon Systems Both Show Early Decline

Hankook Tire & Technology is set to acquire Hanon Systems, and both companies are showing a simultaneous decline shortly after the market opened.

As of 9:40 AM on the 7th, Hankook Tire & Technology is trading on the KOSPI market at 44,050 KRW, down 8,650 KRW (16.41%) from the previous close. The trading volume is 1.09 million shares, with a trading value of approximately 49.1 billion KRW.

At the same time, Hanon Systems is also trading on the KOSPI market at 5,970 KRW, down 520 KRW (8.01%) from the previous close. The trading volume is 8.36 million shares, with a trading value of approximately 53.2 billion KRW.

The market is expressing concerns about the merger and acquisition (M&A) decision of the two companies, citing unclear synergy effects.

Hankook Tire & Technology has decided to acquire additional shares of Hanon Systems for 1.73 trillion KRW. Ultimately, Hankook Tire & Technology’s stake will reach 50.53%. The total amount invested is 2.8 trillion KRW, with a per-share price of approximately 9,325 KRW. This deal was initiated with a memorandum of understanding signed on May 3rd and will be finalized after 8 to 10 weeks of due diligence and obtaining the necessary government approvals.

Hana Securities downgraded the target price to 60,000 KRW and lowered the investment rating to 'Neutral' regarding Hankook Tire & Technology’s acquisition of Hanon Systems, citing unclear synergy potential.

Researcher Song Seon-jae stated, "The additional share acquisition occurred when Hanon Systems’ stock price had significantly declined, and the potential for some cooperation in original equipment (OE) supply to automakers is positive. However, tires and thermal management components are product groups with different raw material procurement, production, and sales characteristics, and the OE sales ratio for tires is low at 20%, so the overall synergy effect is unclear. Therefore, it is difficult to see this deal as providing significant value to minority shareholders."

He added, "Based on the average acquisition price of 8,726 KRW, Hanon Systems’ value is estimated at about 5.2 trillion KRW, which corresponds to a transaction with an approximate ROE of 4% based on Hanon Systems’ net profit over the next two years. Given the substantial capital expenditures (Capex) required for overseas plant expansions until next year, it is regrettable that investing a large amount of funds in M&A will limit resources available for shareholder returns in the near term."

This content was produced with the assistance of AI translation services.