Elliott's $1 Billion Hyundai Stake Adds to Korea Inc. Battle

(Bloomberg) -- Elliott Management Corp., the sometimes-activist hedge fund run by billionaire Paul Singer, said it’s bought a more than $1 billion stake in several Hyundai Motor Group entities and is calling for a clearer plan to improve operations.

The New York-based hedge fund praised the auto conglomerate for simplifying its ownership structure last month after drawing criticism from corporate-governance activists for years. Still, Elliott called the moves a “first step” and said it’s looking forward to meeting with management and stakeholders about the group’s issues.

“More needs to be done to benefit the companies and stakeholders,” the firm said in a statement. “Elliott calls on management to share a more detailed road map as to how it will improve corporate governance, optimize balance sheets, and enhance capital returns at each of the companies.”

Elliott said its holdings were in car manufacturers Hyundai Motor Co. and Kia Motors Corp., as well as parts maker Hyundai Mobis Co.

Hyundai Motor Group said it is confident its proposed changes will benefit stakeholders including employees, customers and investors, according to a statement released after Elliott’s announcement. “Growth, progress, positive financial return and shareholder value are core to the business, as is transparent and sincere communications around the world to all audiences,” it said.

Shares of Hyundai Motor rose as much as 4.9 percent in Seoul on Wednesday, the most in more than five months. Hyundai Mobis climbed as much as 6.1 percent and Kia gained 3.8 percent. Shares of all three companies have trailed the benchmark Kospi index since the beginning of last year.

Overhauling Chaebols

The changes at Hyundai follow similar overhauls by other conglomerates in Korea including national icon Samsung Group, which Elliott has also taken on. Hyundai, a cars-to-steel giant, has been chided for years by shareholder activists such as Kim Sang-jo, who’s now head of the Fair Trade Commission that oversees the nation’s conglomerates.

Kim has said family-run empires, known as chaebols, should untangle cross-shareholdings that obfuscate their ownership structures. His commission welcomed Hyundai’s plan announced last week.

A representative for Elliott declined to comment beyond the statement.

Maryann Keller, an auto industry consultant in Stamford, Connecticut, said it will be very difficult for Elliott to make much headway in Korea. The ownership of companies within chaebols is so intertwined that it’ll be tough to exert much pressure.

“It’s very hard to apply the same tactics that activist investors do in the U.S.,” Keller said. “How will they get a majority of shareholders to go along?”

Hyundai Motor has been struggling in China, the world’s biggest auto market, amid a consumer backlash over political tensions between the country and South Korea. Sales also have been slipping in the U.S. due to a dearth of the sport utility vehicles American consumers are demanding at the expense of sedans.

Elliott’s Battles

In 2016, Elliott took a stake in Samsung Electronics Co. and advocated for the company to split into two and add new directors to its board, among other changes. Samsung rejected most of the demands but offered in April 2017 to pay its first-ever quarterly dividend and cancel tens of billions of dollars in treasury shares.

Elliott also took a stake in Samsung C&T Corp. in 2015 in an attempt to block its proposed takeover of Cheil Industries Inc., arguing the deal undervalued the conglomerate. The South Korean courts rejected Elliott’s attempts to halt stock sales related to the deal, paving the way for the merger to go through.

In the aftermath, prosecutors started investigating the following year whether payments made to entities controlled by Choi Soon-sil, a confidant of the country’s then-President Park Geun-hye, helped Samsung win support for the merger. Park was impeached and removed from office as part of a corruption scandal that engulfed the entire country from late 2016.

Founded in 1977, Elliott oversees about $35 billion, investing across strategies including long-short hedge funds, distressed credit, arbitrage, real estate, shareholder activism and private equity.

--With assistance from Craig Trudell Sohee Kim Kyunghee Park and David Welch

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net.

To contact the editors responsible for this story: Craig Trudell at ctrudell1@bloomberg.net, Elizabeth Fournier at efournier5@bloomberg.net, Anne Riley Moffat

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