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Elliott rejects Hyundai Motor retiring its shares

May 02,2018
Elliott Advisors is not backing down on demands for changes to Hyundai Motor Group’s corporate governance, and reiterated Monday that the group’s selling of treasury shares to enhance shareholders’ value “falls well short.”

“Elliott is encouraged that [Hyundai Motor’s] management has announced initial plans to cancel some of its existing treasury shares and to buy back and cancel additional stock,” a spokesperson for the American hedge fund’s Hong Kong unit said in a statement Monday.

“While this is a positive development, it falls well short of what shareholders require,” it added.

Hyundai Motor on Friday announced that it will retire 4.41 million shares of common stock and 1.28 million shares of preferred stock it already holds. It will retire another 2.2 million common shares and 650,000 preferred shares after buying them back from the stock market.

The process is expected to cost the company roughly 960 billion won ($893.6 million), though that may change if share prices fluctuate. Hyundai expects to retire all the stocks by July 27, according to the filings.

Although the auto company denies it, the retiring of the shares was in response to the hedge fund’s demands for a holding company structure for the sake of the shareholders.

“Cancellation of all existing and future treasury shares” was one of the demands made by Elliott in its “Accelerate Hyundai Proposals” announced on April 23.

Last month, Elliott Advisors revealed that it holds some $1 billion worth of shares in the group’s three major affiliates - Hyundai Motor, Kia Motors and Hyundai Mobis - and has been demanding Hyundai Motor be converted into a holding company by merging with Hyundai Mobis after the group announced a plan to improve its corporate governance.

“Elliott reiterates its call for the Hyundai Motor Group to adopt a more efficient holding company structure,” the company said, once again demanding “balance sheet optimization, improved shareholder returns and [a new] board structure.”

In line with the Moon Jae-in administration’s closer scrutiny of Korea’s family-run conglomerates, or chaebol, Hyundai Motor took a pre-emptive step early in April to announce reforms, including making affiliate Hyundai Mobis into a de facto holding company for the group.

It said it would spin off after-sales service and module businesses from Hyundai Mobis and merge them with Hyundai Glovis, a logistics affiliate, in an attempt to simplify corporate governance and raise profitability.

Elliott, however, has opposed that plan, claiming the businesses being spun off are still highly profitable.

“Hyundai Motor will continue to persuade its shareholders that what we have proposed is the most profitable and reasonable solution to overhaul corporate governance,” a Hyundai Motor spokesperson said.


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