New Problems for AIG, Hyundai Deal

October 23, 2001

The rocky negotiations between Korea’s Hyundai Group, and a consortium of investors headed by American International Group, who are seeking to acquire three Hyundai investment units, including its publicly traded brokerage arm, Hyundai Securities, has apparently encountered further problems.

Hyundai charged yesterday that AIG wanted it to increase the dividends it would pay on the preferred stock AIG and its partners are acquiring for around $850 million, and make the shares convertible into common stock within a year. It said that neither request was acceptable.

AIG responded by withdrawing its negotiators, who had been reviewing Hyundai’s finances as part of their due diligence study, with no indication when they might resume.

Both parties, however, said they expected the deal to eventually go through. AIG had recently reaffirmed its commitment to purchase the Hyundai interests after the attacks of September 11, which are expected to cost it around $800 million; however, hopes for winding it up by the end of this month now look doomed.

A lawsuit brought by Hyundai’s minority shareholders and Korean Labor Unions which seeks to enjoin the acquisition by AIG, could also cause a significant problem. A preliminary decision on the request is expected to be handed down by the Korean court within the next few weeks.

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