Elliott boosts hopes for change at S. Korean auto giant Hyundai

SEOUL/NEW YORK — A unit of activist hedge fund Elliott Management said on Wednesday that it holds more than $1 billion of shares in three key affiliates of South Korea’s Hyundai Motor Group, and said more needs to be done to reform the company.

In its latest challenge to South Korea’s family-run conglomerates, Elliott Advisors called for “a more detailed road map as to how it will improve corporate governance, optimize balance sheets, and enhance capital returns at each of the companies” including Hyundai Mobis, Hyundai Motor and Kia Motors.

Hyundai Mobis shares jumped as much as 6.1% to their highest since Jan. 25. Hyundai Motor rose 4.9%, its highest in three weeks, while Kia Motors gained 3.2% in morning trade in Seoul, versus the broader market’s 1% fall.

South Korean auto-to-steel giant Hyundai Motor Group announced a plan last week to streamline its complex ownership structure as it responds to calls from the government and investors to reform the country’s powerful familycontrolled conglomerates, or chaebols.

The plan will be put to shareholders for approval on May 29, but worries that a proposed restructuring plan would benefit the parent group’s controlling family ahead of company’s shareholders have hit the share prices of group companies such as parts supplier Hyundai Mobis. While Elliott said it was pleased that Hyundai Motor Group has taken a first step toward improving its corporate structure, it said in a statement that “more needs to be done to benefit the companies and stakeholders.”

Under Hyundai’s plan, Hyundai Mobis is to spin off its domestic module and after-service parts businesses and merge them with logistics affiliate Hyundai Glovis backed by Hyundai’s family members.

But some investors and analysts said Mobis could be giving away cheaply what is seen as the more profitable part of its business.

After the merger, Hyundai Motor Group Chairman Chung Mong-koo and his son Chung Eui-sun, who is vicechairman, will buy stakes in Mobis held by other affiliates Kia Motors, Glovis and Hyundai Steel.

“Elliott looks forward to engaging with management and other stakeholders directly on these issues, and to offering recommendations regarding the proposed plan,” the hedge fund said.

A Hyundai Motor spokesman in Seoul was not immediately available for comment outside business hours.

Last year, South Korea’s new antitrust chief told Reuters that he had been in talks with Hyundai Motor Group about unwinding its circular shareholdings, which critics say gives too much power to the controlling family at the expense of shareholders. —