[THE INVESTOR] Plans by South Korea‘s No. 1 car parts maker Hyundai Mobis to streamline its ownership structure through a spin-off and mergers deal may face challenges as proxy advisory firms get ready to make their recommendations to investors this week, market watchers said on May 13.
The predictions come as Elliott Advisors Ltd., a unit of U.S. activist hedge fund Elliott Management Corp., has said it will oppose the move by Hyundai Mobis to transfer its module and local after-sales part businesses to logistics firm Hyundai Glovis that is part of broader efforts by Hyundai Motor Group to resolve the complicated corporate shareholding structure between companies and its leading shareholders.
Observers here said that while the country’s corporate watchdog has lauded the move as a step in the right direction and Hyundai Motor has stressed that the rights of shareholders will be protected and even enhanced, a drop in stock prices of Hyundai Mobis in recent years is fueling concerns that shareholders could move to reject the motion when they vote on May 29.
Shares of Hyundai Mobis ended trading at 237,000 won (US$222.1) on May 11 down from 245,000 won on March 27 just before the merger plan was announced.
Institutional Shareholder Services and the Korea Corporate Governance Service plan to make their views known on the reorganization deal in the coming days, which could influence how individual shareholders and even bigger institutional investors vote on the issue.
Related to the recommendations to be made local proxy advisory firm Sustinvest recently said it opposes the Hyundai Mobis-Hyundai Glovis deal because it argued the move does not serve the interest of stakeholders.
This stance corresponds to the view held by Elliot, which holds just a 1.5 percent stake in Hyundai Group‘s three affiliates.
Industry insiders said that while the vote is expected to pass, if recommendations are made opposing the spin-off and merger, it could influence foreign investors that own 48 percent of Hyundai Mobis’ stocks. In addition, the National Pension Service, which controls critical shares in the part makers, may be influenced by such recommendations. Such a development could tangle the streamlining process from moving forward.
Under local rules, a spin-off and mergers decision needs at least one-third of all shareholders to take part in the vote with two-thirds approving the motion.
In addition if 9 percent of dissenting shareholders exercise their appraisal rights and demand Hyundai Mobis buy their stakes, the company may be forced to call off the plan, because they will have to come up with 2 trillion won in cash.
Reflecting the challenges facing the parts company and automotive conglomerate as a whole, experts here said additional shareholder-friendly policies may be announced shortly to allay concerns and win over voters.
Hyundai Motor Group has emphasized that the streamlining plan will remove the complex ownership structure and meet calls by the market for more transparency and improved corporate governance that will benefit all sides.
By Park Ga-young and newsries (firstname.lastname@example.org)