Hyundai Motor Group will likely become the second South Korean household corporate name after Samsung to engage overseas activist shareholders’ recommendations to overhaul the traditional top-down governance structure of the family-run business group and pay more attention to shareholders’ value.
According to inside sources on Monday, Hyundai Motor Group executives met with representatives of the New York-based hedge fund with assertive activity in Asia to hear out their suggestions on improving management and corporate value of the auto conglomerate, whose ranking at home and abroad has been shaking. Hyundai Motor made IR tours in Europe and Asia last week.
The meeting came after Elliot earlier this month issued a statement welcoming Hyundai Motor Group’s outline to streamline its web of cross-affiliate shareholdings by merging units of Hyundai Mobis with Hyundai Glovis to concentrate the family owners’ stakes in Hyundai Mobis and group units under the parts supplier serving as the new de facto holding entity.
While praising the move as a “step towards an improved and more sustainable corporate structuring,” the activist fund pressed the conglomerate to do more to benefit the companies and stakeholders after revealing that it holds equity interests worth $1 billion across Hyundai Motor units.
In last week’s meeting, Elliot, whose vote of approval is important to pass the merger scheme at shareholders’ meetings of Mobis and Glovis on May 29, listed specific actions to bolster shareholder value - expansion in rewards through dividend increase and buyback plan, rationalization in non-lucrative business, and increase of outside board members.
Hyundai’s IR executives reportedly said the suggestions were in line with the management policy.
The conglomerate needs a vote of confidence from the activist shareholder as some Mobis investors suspect the deal would benefit the owner family more than the shareholders.
Elliot had protested Cheil Industries’ merger with Samsung C&T in 2015 on the same grounds.
The outline will not just simplify the group’s complex cross-shareholding ties but accelerate the hereditary succession from Chairman Chung Mong-koo to his son and vice chair Chung Eui-sun through family transactions.
Shares of Hyundai Motor closed Tuesday up 2.94 percent at 157,500 won and Kia Motors up 0.32 percent at 31,450 won. Hyundai Mobis gained 1.22 percent to 248,500 won and Hyundai Glovis rose 6.52 percent to 188,000 won.
By Kim Jung-hwan and Kim Hyo-jin
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