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The Korea Herald
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THE INVESTOR
March 19, 2024

Automobiles

'Hyundai, rethink the holding company'

  • PUBLISHED :April 24, 2018 - 16:35
  • UPDATED :April 25, 2018 - 15:11
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[THE INVESTOR] Elliott Management, the US activist fund run by billionaire Paul Singer, is pressing a proxy battle with Hyundai Motor Group, saying the Korean auto giant’s recent restructuring plans lack both business logic and benefits for minority shareholders.

Early this month, Hyundai announced it would spin off module manufacturing and after-sales business of Hyundai Mobis, the car parts supplier, to merge them with Hyundai Glovis, the logistics unit, as part of efforts to streamline cross-shareholding lines and improve governance. Unlike earlier predictions, the group said it will not seek a holding unit scheme to carry out more aggressive merger and acquisition deals for its core automotive business.

But Elliott is asking Hyundai to rethink its plans. In a statement on April 23, it proposed Hyundai Motor merge with Hyundai Mobis to form a holding unit that oversees the overall group, a scheme that is believed to benefit Hyundai Motor, Kia Motors and Hyundai Mobis -- the three key units where Elliott holds shares worth over US$1 billion.

Hyundai Motor Group Chairman Chung Mong-koo



Related:
We have US$1b stake in Hyundai Motor: Elliott
Same Elliott, different situation: FSC chief



Industry watchers say Elliott is starting a campaign to block the merger plans ahead of a shareholders meeting next month after its failed talks with Hyundai’s management recently. The New York-based hedge fund may be a minority investor but its move could affect other investors, especially foreigners who own almost 50 percent stake in Hyundai Mobis.

Elliott also claimed in the statement its proposals have already been shared with other Hyundai shareholders, saying “the majority of them have shown a unified support for these improvements.”

“Elliott is believed to own about 1 percent stake in each of the three units. It is focusing on elevating prices of Hyundai Motor, the largest in terms of market value,” said Lee Jae-il, an analyst at Eugene Investment and Securities. “Other shareholders may join the move. But it is unlikely considering its tiny stake.”

Yoo Ji-woong, an analyst at Evest Investment and Securities, also dismissed any significant impact from Elliots move at the upcoming vote by shareholders. But he predicted its demands for higher dividends could be reflected in Hyundai’s future shareholder policy.

“Hyundai Motor has been criticized for paying lower dividends compared to other global carmakers. The management has already hinted at more generous dividend payouts. So Elliott’s demands for a 40-50 percent raise in the dividend payout ratio on net income are likely to be accepted,” he added.

After the demands were publicized, shares of Hyundai Motor, Kia Motors and Hyundai Mobis closed higher on April 24, up 1.88 percent, 0.16 percent and 0.62 percent, respectively from the previous day. In the meantime, Hyundai Glovis shares were down 0.85 percent.

Hyundai Mobis’ shareholders will vote on the merger plan on May 29. The deal should be approved by more than two-thirds of the participating shareholders and more than one-third of the total shares issued. If about 70-80 percent of shareholders attend the vote, 47-54 percent of them should vote in favor of the deal.

Hyundai has secured about 30.2 percent of favorable shares, including 6.96 percent owned bythe largest shareholder Chairman Chung Mong-koo. Foreign investors who make up 48.39 percent of the total shareholders are expected to play a key role in the deal’s approval.

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

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