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Hedge fund Elliott renews push to overhaul Hyundai Motor

Hedge fund Elliott renews push to overhaul Hyundai Motor

Posted September. 08, 2018 07:50,   

Updated September. 08, 2018 07:50


Elliott Management Corp., an American activist fund, has made fresh proposals to restructure Hyundai Motor Group, resuming its push for changes at the South Korean automotive giant. According to Bloomberg and Hyundai Motor Company on Friday, the hedge fund called for the merger of some key units to improve the group’s structure and bolster shareholder value in a letter sent to on Aug. 14.

The fund demanded 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. The merger will push the combined Mobis-Glovis to the top of the governance structure.

Elliott also recommended changes to enhance shareholder returns and improve the diversity and independency of the boards of Hyundai Motor and its affiliates, saying that it owned around 3 percent of Hyundai Motor as of Aug. 13.

However, Hyundai Motor Company apparently declined Elliott’s proposals, citing possible breaches of local rules. The Capital Markets Act prevents companies from sharing material confidential information to only a subset of their shareholders. Industry watchers say that the U.S. fund’s proposals will be not only unable to solve problems arising from local regulations on unfair practices of favoring subsidiaries, but also inappropriate in terms of the balance of shareholder returns. They argue that Elliott is only interested in seeking short-term financial gains, not in enhancing the enterprise value of Hyundai Motor. The unusual, intentional release of a business letter to the press is also considered to be aimed at escalating attack against the auto giant.

“Our current focus and strategic priorities are on improving operations across the company. We hope to share our thoughts on how to improve shareholder value with all of our shareholders in due course,” the company said in a statement.

In March 2018, Hyundai Motor Group announced a group-wide restructuring plan to spin off Hyundai Mobis’ after-sales business and merge it with Hyundai Glovis and leave what is left of Mobis as the group’s holding company. Yet, the company withdrew the proposed deal amid opposition led by Elliott, which said the deal would have shortchanged minority shareholders.

Seok-Jun Bae eulius@donga.com