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Elliott reveals stakes in Hyundai Motor Group

Apr 05,2018
Elliott Advisors announced Wednesday that it has a stake in Hyundai Motor, Kia Motors and Hyundai Mobis worth more than $1 billion.

That is less than 1.5 percent of shares in the three major affiliates of the Hyundai Motor Group. But the Hong Kong-based affiliate of American hedge fund Elliott Management could put an unexpected brake on the auto giant’s plan to overhaul its corporate structure as it temporarily disrupted a merger of Samsung C&T and Cheil Industries in 2015.

Hyundai Motor Group announced last week it would simplify its governance structure by making Hyundai Mobis the de facto holding company of the auto-to-steel empire. The change was expected to eventually simplify the conglomerate’s cross-shareholding structure.

“Elliott is pleased that Hyundai Motor Group has taken a first step towards an improved and more sustainable corporate structure,” said Elliott Advisors, the Hong Kong-based hedge fund unit, in a statement Wednesday that made the disclosure that it holds a stake worth more than $1 billion.

“While this step is encouraging, more needs to be done to benefit the companies and stakeholders,” the statement continued.

It asked the Korean auto company to share “more detailed roadmaps” about its plan to improve its corporate governance, balance sheet and capital returns.

Elliott Advisors didn’t reveal a breakdown of the stakes it holds in each affiliate but the $1 billion stake accounts for approximately 1.4 percent of the three affiliates’ entire market cap based on Tuesday’s closing price.

“It seems Elliott’s intention is to maximize shareholder’s benefit through the latest announcement because the proposed plan announced by Hyundai Motor Group last week didn’t include detailed plans about how it will benefit the common shareholders,” said one analyst Wednesday who asked not to be named.

“It seems the intention is, first off, to take profit from the rattling of the stock market caused by its latest announcement. I think it will later ask for more dividends for common shareholders,” he added.

In order for Elliott to intervene in Hyundai Motor’s overhaul plan, it has to have a significant share in Hyundai Mobis, which is becoming the de facto holding company. Foreign investors account for nearly 48 percent of Hyundai Mobis’ shares.

“While Elliott’s stakes may be not too significant compared to the entire foreign investment, the influence it has on foreign investors as well as domestic investors cannot be overlooked,” said another analyst who asked not to be named.

“If Elliott is not satisfied with what Hyundai Motor offers to shareholders, it might reject the proposed plan and foreign investors are highly likely to be affected by it,” the analyst added.

The gist of Hyundai Motor’s announcement last week is that Chairman Chung Mong-koo and Vice Chairman Chung Eui-sun are selling their stakes in Hyundai Glovis, a logistics affiliate, to use the secured capital to buy Hyundai Mobis shares from its other affiliates. As a result, the two Chungs’ shares in Hyundai Mobis will total 30 percent, making Mobis the main affiliate of the auto-to-steel conglomerate.

The announcement also included Hyundai Mobis spinning off a module and after-sales service businesses and merging them into Hyundai Glovis, which was intended to allow Hyundai Mobis to more effectively concentrate on developing future mobility solution and parts, a segment considered a major growth engine for Hyundai Motor.

The spin-off and merger deal are likely to get their final approval at a shareholders’ meeting scheduled for next month. In order for the deal to be confirmed, two-third of the attending shareholders who have rights to vote have to agree. “Hyundai Motor Group will continue to strive to maximize the company value and shareholders’ profit,” said Hyundai Motor in a statement. “We plan to proactively communicate with the company’s shareholders in both Korea and overseas,” the statement added.

Shares of Hyundai Motor went up by 2.96 percent on Wednesday, closing at 156,500 won ($146) per share. Hyundai Mobis shares went up by 3.52 percent, closing at 264,500 won per share.


BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]