April 26, 2024

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[THE INVESTOR] Revealing that it holds a US$1 billion-plus stake in Hyundai Motor Group, a unit of activist hedge fund Elliott Management on April 3 urged the Korean auto giant to come up with a more detailed roadmap for improving its corporate governance.

“As a major investor, Elliott is pleased that Hyundai Motor Group has taken its first step toward an improved and more sustainable corporate structure,” it said. “While this step is encouraging, more needs to be done to benefit the companies and stakeholders.”

Information on how Hyundai will optimize balance sheets or enhance capital returns, for instance, at each of the companies including Hyundai Mobis, Hyundai Motor and Kia Motors, were a part of what Elliott demanded. 

Elliott Management founder Paul Singer

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The comments came after Hyundai announced last week that it would be streamlining its complex ownership structure amid continuous calls for reforms at conglomerates. Under the plan, Hyundai’s part-making unit Hyundai Mobis will spin off its domestic module and after-service business to merge them with Hyundai’s logistics unit Hyundai Glovis. With the move, four of the nine cross-shareholding lines will be removed.

Elliott has so far not commented on the planned merger that will be voted on at a shareholders meeting on May 29. However, it does seem to be upping the pressure on concerns that the deal would serve to benefit only the owner family ahead of a pending leadership succession.

It is expected to cost the Hyundai founding family about 4.5 trillion won (US$4.20 billion) to acquire more stake in Mobis -- the group’s de facto holding company -- to help Hyundai Motor Chairman Chung Mong-koo’s son Eui-sun tighten his grip.

Currently, Eui-sun and his father own 23.3 percent and 6.7 percent stake in Glovis, respectively. Stock value is expected to soar following the merger, after which Eui-sun is likely to sell some of his shares to snap up Mobis stocks.

Back in 2015, Elliott failed to stop the merger of two Samsung Group affiliates that would allow the owner family to further consolidate their stake holdings at Samsung Electronics, the group’s crown jewel. But the fierce proxy battle forced Samsung to improve its governance structure and dole out shareholder-friendly policies, such as bigger dividend payouts.

By Lee Ji-yoon (jylee@heraldcorp.com)