Chung Ki-sun HD Hyundai(267250), chair, will receive a gift of 3.54% of HD Hyundai equity from his father, Chung Mong-joon, chair of the Asan Foundation. When the gift is completed, Chung's equity stake will rise from 6.12% to 9.67%, making him the No. 2 shareholder of HD Hyundai.
According to the Financial Supervisory Service's electronic disclosure system on the 4th, Chair Chung plans to gift 2.8 million shares of HD Hyundai common stock he holds to Chung on Aug. 3. That equals 3.54% of HD Hyundai's 78,993,085 total outstanding shares.
With this gift, Chung will surpass the National Pension Service (NPS) (7.12%), the current No. 2 shareholder, and hold the second-largest HD Hyundai equity stake after Chair Chung. Meanwhile, Chair Chung's equity ratio will fall from 26.60% to 23.05%, but he will retain his status as the largest shareholder.
HD Hyundai closed at 208,500 won that day, and a simple calculation based on the closing price puts the value of the 2.8 million gifted shares at 583.8 billion won. HD Hyundai's market capitalization is about 16.47 trillion won.
The gift tax Chung will owe is estimated at about 340 billion–350 billion won based on the current share price level. However, the actual gift amount is calculated using the average closing price over the four months spanning the two months before and after Sept. 3, the gift date, so the final tax will vary with the share price trend. Shares held by the largest shareholder and related parties are subject to a 20% premium on the valuation amount, and the top gift tax rate of 50% applies to the portion of the tax base exceeding 3 billion won.
Because a larger one-time transfer of equity would increase the gift tax burden accordingly, this gift is interpreted as a step-by-step transfer of equity in consideration of the tax burden.
Chung was promoted from senior vice chair to chair in Oct. last year and is leading the group's management. The business community sees the gift as likely to speed up the third-generation succession at HD Hyundai. There is also an assessment that they chose the straightforward approach, as the equity in the holding company is being transferred directly without a separate governance restructuring.