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Hyundai, Elliott dig in for battle

Hedge fund says it will vote against governance revamp
May 12,2018
Elliott Management and Hyundai Motor Group are heading to the trenches, as neither side is willing to back down on the automaker’s controversial plan to untie its tangled cross-shareholding structure.

The American activist hedge fund made an official announcement on Friday that it will vote against the automaker’s plan to restructure its corporate governance at its upcoming shareholder meeting, scheduled for May 29.

Hyundai Motor Vice Chairman Chung Eui-sun, the de facto leader of Korea’s biggest carmaker, didn’t mince words on Elliott.

“That’s the way they do business,” Chung said in an interview with Bloomberg published on Friday. “We will listen carefully and if there are proposals that bring benefits to our company and other shareholders, we will review some of that.”

Hyundai Motor and its affiliate Hyundai Mobis recently rolled out a series of measures in response to Elliott’s demands, most of which are aimed at convincing other shareholders to vote for the company’s restructuring plan. Hyundai Motor retired treasury stocks worth $890 million early this month, and Hyundai Mobis also canceled treasury stocks worth $557 million. These cancellations will increase the value of other shareholders’ stakes.

Elliott demanded the appointment of three independent board members to guarantee a diversity of opinions as well as additional dividends for shareholders.

Chung said that making more money is the “best shareholder-friendly policy” because it leads to more dividends for shareholders.

Spinning off Hyundai Mobis after-sales service and car module businesses to logistics company Hyundai Glovis is at the center of this initiative, according to the vice chairman. Shifting Hyundai Mobis into a future mobility parts supplier and ditching its other businesses is what Chung believes will most effectively maximize profit in the connected and self-driving car era.

Elliott, however, doesn’t think so.

On Friday, the New York-based hedge fund, which has a $1 billion stake in Hyundai Motor, Kia Motors and Hyundai Mobis, said it will vote against the restructuring plan at the shareholders’ meeting, and urged other shareholders to do the same.

In a presentation posted on the website www.acceleratehyundai.com, Elliott reiterated that the planned spinoff and merger plan lacks a proper business rationale and that the 0.61:1 merger ratio between Mobis and Glovis is not fair to shareholders.

After the spin-off, Hyundai Mobis would act as the de facto holding company of Hyundai Motor Group and would be in charge of the module business and after-sales services for the global market. The divisions spun off to Hyundai Glovis being in charge of the businesses in Korea, which Elliott said would be a pointless move.

“We are not convinced by the business rationale provided to support separating the module manufacturing and after-sales services businesses from the international subsidiaries in the same business lines,” the presentation read.

The presentation also details the similarities between Hyundai Motor’s latest restructuring plan and Samsung C&T and Cheil Industries’ controversial 2015 M&A deal. The deal, which Elliott strongly opposed, eventually led to the impeachment of then-President Park Geun-hye and put Samsung heir Lee Jae-yong and her behind bars.

Elliott’s presentation said that when Samsung C&T re-listed in the stock market after the merger, it underperformed the Kospi market by 49 percent. Chung Jin-haeng, the president of Hyundai Motor, played down the Elliott’s announcement.

“Elliott is just one of many shareholders out there,” Chung said to reporters after a luncheon event on Friday. “After the shareholder meeting, we are going to announce more shareholder-friendly policies.”


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