[THE INVESTOR] A civilian expert committee set up by the National Pension Service is set to decide the future of Hyundai Motor Group’s controversial corporate restructuring plan, the state-run pension fund said on May 17.
The committee -- made up of nine experts selected on recommendations by the government, academia and subscribers -- will be in charge of making the fund’s voting decision at the Hyundai Mobis’ shareholders meeting on May 29.
The fund management committee will hold a meeting on May 17-18, to work out the details.
While the committee -- which includes between nine to 12 internal officials -- has the final authority over NPS’ investment decision, it can authorize a special group made up of private sector experts to vote on its behalf, if the matter is controversial.
As the second largest shareholder of Mobis, NPS with a 9.82 percent stake could become the swing voter on the spin-off merger deal. Hyundai Chairman Chung Mong-Koo and affiliates hold a combined 30.17 percent stake in Mobis, while foreign investors, including Elliott Management, have 48.6 percent, and 8.7 percent is held by individual and institutional investors in Korea.
In March, Hyundai announced Mobis would spin off its lucrative module and after-service parts business, and merge with logistics unit Glovis, following the government’s persistent calls to improve the complex ownership structure that gives too much power to the controlling Chung family.
The plan requires two-thirds consent out of one-third total shareholders with voting rights attending.
When considering the average of 70-80 percent turnout rate at shareholders meetings in recent years, Mobis needs at least 50 percent approval for the restructuring plan to pass, experts say.
Which means, the firm, in addition to the 30 percent held by Hyundai-related entity, must obtain consent of at least 20 percent outside shareholders to win over the deal. If more foreign investors decide to show up, Mobis needs more votes.
“With about 10 percent stake, the NPS’ role will be critical at the upcoming shareholders meeting, as it can also influence other institutional and foreign investors,” said Park Sang-in, an economics professor at Seoul National University.
NPS, the world’s third-largest pension fund with 624 trillion won (US$578.44 billion) in assets, is in dilemma as it also holds an almost equal amount of 10 percent stake in Glovis.
Experts say the pension fund operator is being very prudent especially after its approval of the controversial merger of Samsung companies back in 2015.
“The NPS has to consider not only financial aspects, but also other areas such as environmental, social and governance impact, before making the decision,” said Hong Soon-tak, a political activist and public accountant. “As NPS’ decision affects the local stock market at large, it will also have to consider the effects on its portfolio of local companies.”
Local proxy advisor Korea Corporate Governance Service, which advises NPS, will make its recommendation on the deal within this week.
The two largest proxy advisors -- Institutional Shareholder Service and Glass Lewis -- have recommended investors to vote against the spin-off merger plan, saying the “deal appears to be unfavorable for Mobis’ shareholders” and carries “questionable logic” and “inadequate valuation,” joining the opposition campaign by US hedge fund Elliott Management.
By Ahn Sung-mi (firstname.lastname@example.org)