[THE INVESTOR] Reacting to US activist fund Elliott Management’s escalating attack against the auto giant, Hyundai Motor Vice Chairman Chung Eui-sun on May 11 said he was “not fazed,” expressing confidence on winning over shareholders at the upcoming vote on May 29.
“That’s the way (Elliott) does business,” Chung was quoted as saying in an interview with Bloomberg. “We will listen carefully and if there are proposals that bring benefits to our company and other shareholders, we will review some of them.”
In his first remarks since the firm announced a restructuring plan in March, the heir-apparent said Hyundai’s shareholder returns are “just beginning,” hinting there are more policies to be unveiled in the future. Chung emphasized that the latest plan will improve earnings and returns for its investors, creating a “virtuous cycle” for the group.
Hyundai Motor Group Vice Chairman Chung Eui-sun
It falls short: Elliott on Hyundai's W1tr share buyback
'Hyundai, rethink the holding company'
To do so, the auto giant will focus on making its parts-making affiliate Hyundai Mobis a leading global supplier in future technology, that could challenge Germany’s Robert Bosch. Mobis is eying the possibility of acquiring four to five firms in the future for further growth, he added.
Billionaire Paul Singer’s New York-based hedge fund -- which has more than US$1 billion stake in three key units of the auto group –- has been pushing Hyundai to modify its governance overhaul plan. Elliott dismissed the move -- which entails spinning off Mobis’ module manufacturing and after-sales business and merging with its logistics unit Hyundai Glovis -- as insufficient for investors, and insisted the firm to adopt a holding company structure instead.
Earlier in the day, Elliott upped the pressure against Hyundai, saying it will vote against the automaker’s restructuring plan at the shareholders’ vote, while pressing others to do the same.
Arguing that the auto giant’s restructuring move is “inadequate and unfair to shareholders,” Elliott said in a statement that the plan “fails to provide a sound business rationale, fails to offer terms that are fair to all shareholders, fails to achieve any meaningful simplification of its corporate structure, fails to address significant valuation discounts and fails to optimize balance sheets, improve shareholder returns or corporate governance.”
In response, Hyundai said it cannot accept Elliott’s demands.
“The restructuring plan is the optimal solution to improve shareholders and corporate value,” a Hyundai spokesperson told The Investor. “We find it difficult to adopt Elliott’s demands for a holding firm structure, which could damage our business competitiveness.”
Hyundai said it will continue to communicate with shareholders on the purpose and benefits of the plan to convince them ahead of the upcoming vote.
Mobis CEO Lim Young-deuk also raised concerns, saying if Hyundai succumbs to Elliott’s demands, the auto giant will fall behind in the future technology race, in an interview with a local news outlet.
By Ahn Sung-mi (firstname.lastname@example.org)