The U.S. hedge fund Elliott Management Corp. proposed that car-parts maker Hyundai Mobis sell its after-sale service business to affiliate Hyundai Motor Company, and then merge what is left of Mobis with logistics affiliate Hyundai Glovis. This is a demand made by the activist fund reportedly owning around 3 percent of Hyundai Motor to practically break apart the country’s largest auto parts company.
Billionaire Paul Singer’s fund announced in April that it owned more than 1 billion U.S. dollars (around 110 billion won) worth of shares in Hyundai Motor, Kia Motors, and Hyundai Mobis. Elliott’s active engagement in the restructuring of Hyundai Motor Group was apparently because the fund believes that it can bolster the value of Hyundai Mobis shares it owns in the process of splitting up and merging affiliates. The latest proposal reveals the true intention of the fund that hopes to get away with short-term financial gains by disbanding a sound, problem-free company.
Elliott also suggested that Hyundai “form a committee to develop a restructuring plan,” which is an excessive intervention in the group’s management as an “investor with 3 percent of shares.” Hyundai Motor Group declined the fund’s proposals, citing possible breaches of local rules that prevent companies from sharing confidential information selectively to some investors. Still, it remains to be seen how things will develop. In May, Elliott launched a public campaign opposing Hyundai’s restructuring plan and pressured the group into canceling its plan and a general meeting. During this process, Hyundai Motor also canceled its treasury stocks worth about 1 trillion won. The U.S. fund’s public calling for the violation of the country’s positive law reveals nothing but its arrogance towards even the South Korean government.
In fact, Elliott targets both companies and governments alike. Suffering a defeat in its opposition to the merger of Samsung C&T and Cheil Industries in 2015, the hedge fund filed an 800 billion won Investor-State Dispute (ISD) lawsuit against the South Korean government. The fund is also known to seek its goal by fair means or foul. Its Aug. 14 letter to Hyundai Motor Group was made public by a Bloomberg report, and the act of disclosing a confidential business letter through the press to pressure a company is anything but desirable.
Foreign speculative capital including Elliott has tried to play upon loopholes in South Korea’s capital market system, and this is largely due to the government’s policies against large conglomerates. Businesses have called for the introduction of measures to protect management rights such as dual class rights, but their voices have been met with silence every single time. The South Korean government is even pursuing the revision of commercial law to make it easier for minority shareholders to intervene in management through measures such as cumulative voting. However, though belated, the system should be overhauled. We should no longer sit idle and helplessly watch our businesses falling victim to predatory speculative capital.