Hyundai Motor tumbles on Hyundai Eng bid report

SEOUL (Reuters) - Shares in South Korea's Hyundai Motor (005380.KS) tumbled 5 percent on Thursday, after a report that its parent group may bid for a $2.1 billion stake in Hyundai Engineering & Construction (000720.KS).

Hyundai Engineering creditors led by Korea Exchange Bank (004940.KS) control 38.5 percent of the contractor, worth 2.6 trillion won ($2.1 billion), and said this week they would kickstart the auction by selecting sales lead managers in July, and pick a preferred bidder by the end of this year.

Media reports have said former Hyundai group firms such as Hyundai Motor, Heavy Industries (009540.KS) and construction materials firm KCC (002380.KS) may bid for the former flagship firm of the Hyundai conglomerate, which is split into auto, heavy industry and trading groups after the 1997-98 Asian financial crisis.

The Chosun Ilbo daily said in an unsourced report that Hyundai Motor Group, which includes Hyundai Motor and Kia Motors (000270.KS), has agreed with other Hyundai group owners that the auto group would take over the construction firm.

Hyundai Motor said there was no such meeting or agreement and said nothing has been decided.

By 0050 GMT, shares of Hyundai Motor dropped 4.5 percent, and Hyundai Engineering rose 5.1 percent in a broader market .KS11 down 1.2 percent.

Analysts said the acquisition report was weighing on Hyundai Motors.

"The financial burden probably is not an issue. It has more than enough cash buy... But Hyundai Motor also already has a construction unit, Hyundai Amco," said Choi Dae-sik, an analyst at HI Investment Securities.

Song Sang-hoon, a Kyobo Securities analyst, said there were not many synergies between the two units, with Hyundai Engineering specializing in plant construction, while Hyundai Amco, was more focused on auto and steel-related contracts.

($1=1222.1 Won)

(Reporting by Miyoung Kim and Jungyoun Park; Editing by Jonathan Hopfner and Lincoln Feast)