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Singer's Elliott Loses Fight With South Korean Auto Giant

Singer's Elliott Loses in Showdown With South Korean Auto Giant

(Bloomberg) -- Hyundai Motor Group prevailed over Elliott Management Corp. in a hotly contested proxy fight over dividends and board reforms, a year after the hedge fund successfully blocked an $8.8 billion merger planned by the South Korean conglomerate.

Shareholders of Hyundai Motor Co. and Hyundai Mobis Co. on Friday rejected Elliott’s calls for $6 billion in one-time payouts and a board shake-up, voting instead in favor of dividends and independent directors proposed by the two firms. The companies announced the outcome of the meeting in Seoul on Friday.

The New York-based hedge fund holds about 3 percent in Hyundai Motor and 2.6 percent in Mobis. South Korea’s state-run National Pension Service owns about 8.7 percent of the automaker and 10 percent of Mobis, making it the second-biggest shareholder in both.

Singer's Elliott Loses Fight With South Korean Auto Giant

The results could pave the way for Hyundai Motor’s chairman-in-waiting Euisun Chung to move ahead with his push to invest billions of dollars in future technology as well as a group restructuring that was derailed by billionaire Paul Singer-led Elliott. It’s also the second defeat for the New York-based activist investor in Asia’s fourth-largest economy since it lost a fight with the Samsung Group in 2015.

In a letter to shareholders a day before the voting, the Elliott said it’s “pleased to observe a growing consensus on the need for real, lasting change” at Hyundai Motor Group. While the reforms initiated by a part of the group are a “small step in the right direction,” the management “has not taken the necessary measures to match the scale of the group’s issues,” it said.

The meetings lasted about two hours at both the companies, with music blaring in between counting of ballots. One Hyundai Motor shareholder likened the Elliott’s dividend proposal to “splitting open the goose that lays golden eggs,” while adding he isn’t happy with the carmaker’s proposal, either.

In a small win for Elliott, shareholders passed a resolution proposed by the fund to set up committees to steer director compensation, corporate governance and communication.

Singer's Elliott Loses Fight With South Korean Auto Giant

Board Expansion

As for Hyundai Mobis, the biggest shareholder of Hyundai Motor, the most contentious issue was Elliott’s proposal to expand the board to 11 members from nine. Only about 21 percent of the shareholders voted for that resolution, which needed a two-third majority to succeed.

Hyundai Motor shares slipped 2 percent as of 12:09 p.m. in Seoul, while Mobis shares declined 0.5 percent.

Earlier this month, shareholder advisory firms including Glass Lewis & Co. and Institutional Shareholder Services Inc. told investors to vote against the one-time dividends Elliott was seeking. They argued Hyundai needs the cash for investment as the global auto industry races to develop electric, self-driving and flying cars. However, they were split on recommendations for director nominations.

The pension fund NPS came out in support of the Korean auto conglomerate last week, saying Elliott’s proposal of $6 billion payouts were “excessive.”

--With assistance from Shinhye Kang.

To contact the reporters on this story: Sohee Kim in Seoul at skim847@bloomberg.net;Sam Kim in Seoul at skim609@bloomberg.net

To contact the editors responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net, Peter Pae

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