Activist Elliott wins support for Hyundai shakeup

NEW YORK • Elliott Management Corp.’s efforts to revamp the boards of Hyundai Motor Co. and Hyundai Mobis Co. were given a boost Monday with a prominent shareholder advisory firm supporting some of its director nominees.

Institutional Shareholder Services Inc. urged investors in Hyundai Motor to support two of Elliott’s three nominees for the board. It also threw its support behind two of Elliott’s nominees at Mobis. It didn’t support Elliott’s call for the carmaker and its biggest shareholder to return almost 7 trillion won (US$6.2 billion) in excess cash to shareholders through special dividends.

The dual reports Monday by ISS gave Elliott a lift after another prominent shareholder advisory firm, Glass Lewis & Co., came out against the New York-based hedge fund’s effort at Hyundai Motor.

ISS agreed with Elliott that the companies’ total shareholder returns and operational underperformance appear to be at least partially linked to shortcomings in strategies, operational execution and capital allocation. Therefore, changes at the board level were warranted, it said.

“The company’s track record in capital allocation is not comforting, though a reconstituted board might be better able to assess the real capital needs and determine an appropriate level of returns to shareholders going forward,” ISS said in the Mobis report.

The advisory firm said the most favourable outcome at Mobis would be to add two directors to the nine-member board and to elect two of Elliott’s nominees — Robert Kruse Jr. and Rudolph William Von Meister — along with two from the company’s slate. At Hyundai Motor, it recommended investors vote for two of Elliott’s three nominees, John Y. Liu and Robert Randall Macewen, and against two of the company’s three nominees, Eugene Ohr and Lee Sang-seung.

Representative for the Seoul-based companies weren’t immediately available for comment outside regular business hours in South Korea.

Glass Lewis argued in its report Friday that Hyundai Motor needs to invest heavily in research and development. It also favoured the automaker’s nominees for independent directors, opposing Elliott’s. A shareholder vote on the proposals is set for March 22.

Elliott, run by billionaire Paul Singer, wants the companies to create new subcommittees overseeing compensation and governance. It argues that both companies would still have ample cash to pounce on any opportunities that arise.

Elliott’s proposals are the latest salvo in its dispute with Hyundai. Last year, Elliott successfully halted a Us$8.8-billion merger for restructuring of the auto group, arguing it wasn’t in the best interest of shareholders.

Hyundai Motor has said it’s conserving cash at its subsidiaries to survive intense competition in the global auto industry.