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Hyundai Mobis tries to please shareholders

May 03,2018
Hyundai Mobis, under pressure from an American activist hedge fund, is ramping up its efforts to appeal to shareholders.

Hyundai Motor’s auto parts affiliate also clarified its long-term goals, pledging to reach an operating profit rate of 10 percent by 2025.

The company announced on Wednesday that it will gradationally retire nearly 600 billion won ($557 million) worth of its stocks.

It will first retire 1.61 million treasury stocks worth 400 billion won by next year, which is the total amount of common shares that the company can cancel.

The affiliate also said it will buy back an additional 760,000 common stocks and retire them over the next three years. The stocks it will buy back are worth 187.5 billion won, and Hyundai Mobis said it will retire 62.5 billion won of them every year.

The 1.61 million stocks the company will retire is based on the number of shares Hyundai Mobis will have after it carries out its planned spinoff of its after-sales service and car module businesses based on a 0.79:0.21 split ratio.

“In total, 2.37 million stocks will be retired, which accounts for 3.1 percent of all the stocks we have issued,” Hyundai Mobis said in a statement.

“It means earnings per share and dividends per share will be enhanced by 3.1 percent, respectively,” the company added.

This is the first time that Hyundai Mobis has canceled common stocks since 2003. The company doesn’t own any of its preferred stocks.

“After the company spins off the after-service and module businesses, the entire amount of issued Hyundai Mobis stocks will shrink as well as the dividend payable to shareholders,” a spokesperson at Hyundai Mobis said Wednesday. “We are trying to compensate for that by retiring our own treasury stocks.”

Hyundai Mobis plans to spin off its after-service and module businesses and merge them with Hyundai Glovis as part of Hyundai Motor Group’s corporate governance overhaul scheme. The spinoff and merger ratio between Mobis and Glovis has been set at 0.61:1.

The split ratio within Hyundai Mobis has been set at 0.79:0.21, which means that a shareholder who has 100 Hyundai Mobis shares will end up having 79 shares of Hyundai Mobis and 61 shares of Hyundai Glovis after the split and merger are completed.

Hyundai Mobis also said it will implement an interim dividend system by paying out approximately one-third of the yearly dividend amount in the middle of the year. The new system, which will attempt to stabilize shareholders’ dividend payments, will start next year.

In addition to last Thursday’s big announcement on the company’s long-term vision, Hyundai Mobis also said it will try to reach an operating profit rate of 10 percent by 2025 in the regulatory filing posted on Wednesday. It will reach its goal by reducing its cost rate to below 60 percent, it said.

“Setting shareholder-friendly policy has always been the company’s agenda. It is not directly related to Elliott’s latest announcements,” a Hyundai Mobis spokesperson said.


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