As Elliott Looms, Hyundai Weighs `Shareholder Friendly' Plan

(Bloomberg) -- An adviser of Hyundai Motor Group’s revamp effort said he expects the South Korean carmaking conglomerate to unveil changes to enhance shareholder value amid pressure from investors including Elliott Management Corp.

Elliott, the sometimes activist fund run by billionaire Paul Singer, disclosed last week it had acquired a more than $1 billion stake in Hyundai Motor Group companies and wanted to see a clearer picture of plans to improve its operations. The move came a few days after Hyundai said it would simplify its ownership structure. Elliott, calling the announcement just a “first step,” said its holdings are in Hyundai Motor Co., Kia Motors Corp. and Hyundai Mobis Co.

"Basically, when we drew a picture of the restructuring plans, it was our principle to boost shareholders’ value," said Jeong Young-chae, chief executive officer of NH Investment & Securities Co. in Seoul, which is one of the advisers working with Hyundai. "I understand that Hyundai Motor Group has been planning shareholder friendly polices over the years."

Jeong said he has no direct knowledge of what Elliott has demanded so far.

The auto and parts group met with Elliott and other stockholders in London this week and discussions included the New York-based hedge fund’s concerns about overlapping shareholdings among companies in the group, according to people familiar with the matter. Hyundai is expected to take the discussions into consideration in its restructuring plan, said the people, who asked not to be identified because the matter is private.

Read more about Elliott’s activist push at Hyundai Motor here.

As Elliott Looms, Hyundai Weighs `Shareholder Friendly' Plan

Hyundai Motor shares rose 1.3 percent, the most in a week, to close at 152,000 won in Seoul trading, while the benchmark Kospi index fell about 0.1 percent.

Elliott’s investment comes as South Korean President Moon Jae-in plans to clamp down on family-run conglomerates that flout corporate governance standards. Moon has appointed a Fair Trade Commission head, Kim Sang-jo, whose nickname is “chaebol sniper” for his decades as a shareholder activist.

Kim has cited Hyundai among the chaebol that should untangle cross-shareholdings that obfuscate their ownership structures. His commission welcomed the initial restructuring Hyundai announced March 28.

“The proposed changes will benefit every stakeholder including employees, customers and shareholders,” Hyundai Motor Group said in an email, without providing details of the changes. A representative for Elliott declined to comment.

Hyundai Motor made a similar statement when announcing restructuring steps March 28. Under that plan, Hyundai Mobis will spin off parts of its business which will be merged into logistics firm Hyundai Glovis. The deals are subject to approval by shareholders of Mobis and Glovis in meetings scheduled for May 29.

“That restructuring plan was organized by the rules, not by the interests of the largest shareholders,” Jeong said in a phone interview.

Jeong suggested that Hyundai Motor isn’t likely to create a holding company structure as a way to clear out cross shareholdings because it is a vertically integrated manufacturer that continues to have a lot of transactions among group companies.

A previous restructuring step that put the group’s Hyundai Mobis in control of other units was designed to eliminate “circular” shareholdings and resolve internal trading among affiliates, Jeong said.

“The current structure was designed not to disrupt the vertically integrated business and to cut ties of circular shareholdings,” Jeong said.

Elliott’s investment in the group marks a return to South Korea three years after it began pushing for reforms at the nation’s biggest conglomerate, Samsung Group, narrowly losing in a proxy fight. That effort did yield some results, including playing a key role in events that led to the impeachment of the country’s president and the jailing of Samsung’s de-facto leader.

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