Analysts: Hankook share sale is Michelin “cashing in on failed partnership”
Following the announcement that Michelin is selling its 9.98 per cent share of Hankook, financial analysts have shared their view that the move amounts to “cashing in on a failed partnership.” Morgan Stanley's suggestion is that the Hankook shareholding ended up being a mere financial investment after attempts to cooperate more broadly “repeatedly failed.” Michelin built its stake in Hankook between 2003 and 2008 and reportedly tried to establish a partnership with Hankook to develop distribution, R&D and manufacturing together in Asia.
Looking at the numbers associated with the deal, the analysts suggest that Michelin could make greater than 300 million euros of pretax profits from the sale, assuming the stock was bought at an average price of 14,600 Korean won and is sold at a five per cent discount of its current share price. The total cash inflow could be as much as 450 – 500 million euros, which Morgan Stanley points out is equal to roughly half the proceeds of the French manufacturers 2010 rights issue. The result is a significant amount for the company to reinvest into capital expenditure.
With Hankook shares at an all time high and with the market likely to respond positively to news, the received wisdom of the analysts is that this is a good time to sell.