South Korea NPS rejects Visteon's offer for Halla shares

SEOUL (Reuters) - South Korea's National Pension Service (NPS) said on Monday it rejected the tender offer made by U.S. auto parts supplier Visteon Corp (VC.N) to acquire its 8.1 percent stake in car air conditioner maker Halla Climate Control Corp (018880.KS).

Visteon, which owns 70 percent of Halla Climate, announced earlier this month a tender offer to buy the remaining 30 percent at 28,500 won ($25) per share, or some $800 million in total. The move was with an eye toward delisting Halla from the South Korean stock exchange.

"Considering the corporate value and future growth prospects of Halla Climate, we believe not participating in the tender offer would be better for long-term returns," NPS said in a statement. The pension fund declined comment on whether it would consider a possible higher offer by Visteon.

NPS said in a regulatory filing on July 9 it reduced its Halla Climate stake from 9.8 percent to 8.1 percent as of April 16, but still remains second-largest shareholder. Without at least a portion of NPS' stake, the U.S. auto parts maker cannot build the 95 percent stake it would need to delist Halla Climate under South Korean rules.

A representative for Visteon was not immediately available for comment.

DISPARATE OUTLOOK

NPS initially acquired a 5.1 percent stake in Halla Climate at a price of 8,457 Korean won ($7.4) per share in 2009, and subsequently added to its holdings.

Analysts estimated NPS had acquired its entire stake at an average of around 10,000 won ($8.8) per share, which meant the pension fund could have sold at nearly triple the purchase price if NPS had accepted Visteon's offer.

Analysts said NPS showed signs of mulling over the price as well as possible repercussions of a foreign firm gaining complete control of the South Korean air conditioner and heater maker.

"The role Halla Climate plays in Hyundai Motor Group's value chain was likely the second-biggest influence in NPS' decision after price, as NPS is also a large shareholder in Hyundai Motor (005380.KS) and Kia Motors (000270.KS)," said Shin Chung-kwan, auto analyst at KB Investment & Securities.

Hyundai Motor Group relies on Halla for 75 percent of its air-conditional and heating system needs.

"If there's any latent risk to the value of several trillion won worth of Hyundai and Kia stakes in selling Halla, NPS would have declined," added Shin.

VISTEON'S MOVE

Local analysts previously said Visteon might feel compelled to raise its bid depending on shareholders' acceptance of its tender offer, due to the importance of Halla Climate in Visteon's business.

Visteon said full control of Halla Climate, which had an 2011 revenue of $3 billion, will boost its climate control business. The former Ford Motor Co (F.N) affiliate, which also has electronics, interiors and lighting businesses, had a 2011 revenue of about $8 billion. <ID: nL3E8I53XF>

"It was always a possibility that the market might refuse Visteon's initial price," said Lee Sang-hyun, auto analyst at NH Securities. "If Visteon was serious about the reasoning behind its tender offer, it's likely to have plans for a higher bid."

Halla Climate shares closed at 24,850 Korean won ($22) on Monday, an 11 percent drop from this year's highest closing on the news of Visteon's offer earlier this month and cementing an eight-session losing streak by dropping 2.7 percent since Friday's closing. ($1 = 1141.2000 Korean won)

(Reporting By Joyce Lee)