SEOUL (Reuters) – The showdown between U.S. activist hedge fund Elliott Management and Hyundai Motor Group is about to come back to a head on Friday when shareholders collect to vote on the fund’s calls for for a hefty particular dividend and a board shake-up.
FILE PHOTO: Paul Singer, founder and president of Elliott Management Corporation, speaks at WSJD Live convention in Laguna Beach, California, U.S., October 25, 2016. REUTERS/Mike Blake
Elliott’s problem to South Korea’s second-biggest family-run conglomerate is the latest instance of shareholder activism in Asia’s fourth-biggest economic system, lengthy dominated by highly effective cliques that took minority buyers as a right.
The activist fund based by billionaire Paul Singer tasted success final yr when it and different buyers opposed Hyundai’s possession restructuring plan on the foundation that it might favor relations relatively than minority shareholders.
While it seems to be more likely to fail on most counts on Friday, even when it manages to achieve a single seat at Hyundai it might be a significant victory for shareholder empowerment in the nation.
Elliott is attempting to rally shareholder assist for dividend payouts from Hyundai Motor and Hyundai Mobis for 2018 price a mixed 7 trillion received ($6.2 billion), saying the group ought to eliminate its extra capital.
That is greater than six occasions increased than the $1 billion in payouts provided by the Hyundai associates, which say Elliott’s proposals would hamper future investments and acquisitions.
Elliott has additionally demanded a complete of 5 board nominees at Hyundai Motor and Hyundai Mobis to handle “governance shortcomings”.
“We urge all shareholders to send an unambiguous message to the group in support of good governance and accountability, and to state unequivocally: The status quo is not acceptable – change must come to HMG,” Elliott mentioned in the letter to shareholders on Thursday.
The marketing campaign obtained a probably deadly blow final week when South Korea’s National Pension Service, the second-biggest shareholder in the two corporations, mentioned Elliott’s calls for had been “excessive”.
“I cannot help but think that Elliott is trying to make quick bucks and leave rather than enhancing long-term shareholder value,” Kim Woo-chang, one in every of the members of the NPS panel which made the choice to vote in opposition to the proposals, informed Reuters.
“Elliott’s strategy has failed. It was short-sighted.”
The NPS holds stakes of eight.7 % and 9.45 % in Hyundai Motor and Hyundai Mobis, respectively. About 30 % of the two corporations are owned by Hyundai associates and relations. Resolutions require approval from a majority of the votes of shareholders current at the conferences.
As of November, Elliott held greater than 2.5 % of widespread inventory in Hyundai Mobis, three % in Hyundai Motor and a pair of.1 % in affiliate Kia Motors.
BENEFIT OF THE DOUBT
Questions about Hyundai Motor Group grew in 2014 when it paid $10 billion to purchase land for a brand new headquarters in Seoul, thrice the appraised worth.
Some buyers stay deeply troubled by that call and need to see change at the conglomerate, even when they aren’t able to assist Elliott’s proposals.
“It is not that Elliott’s demand is nonsense. Hyundai has accumulated cash, and it has a poor track record of using cash,” mentioned Park Yoo-kyung, a Hong Kong-based director of Dutch pension fund APG Asset Management, which holds shares in Hyundai Motor and Hyundai Mobis.
“But we decided to give (the newly created board) the benefit of the doubt,” Park informed Reuters.
Leading proxy advisor ISS has really useful buyers vote for Elliott’s proposal to broaden the board to 11 administrators from 9 at Hyundai Mobis to make room for director nominees from each the activist fund and administration.
Seven out of 9 funds which disclosed their proxy votes forward of the conferences mentioned they might again Elliott’s proposals for board modifications at Hyundai Mobis, in response to the web site of Korea Corporate Governance Service.
For Hyundai Motor, 5 out of six funds mentioned they might vote in opposition to Elliott’s three director nominees, who will compete with Hyundai’s nominees to win board seats.
Once this battle is over Hyundai nonetheless faces the larger problem of revamping the group’s possession construction, a course of which is attracting shut scrutiny from Elliott, NPS and different buyers.
Reporting by Hyunjoo Jin; Editing by Stephen Coates
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