Hedge fund urges better revamp at Hyundai

US activist hedge fund Elliott Management dismissed the restructuring plan of Hyundai Motor Group as insufficient on Monday and called on the South Korean conglomerate it to adopt a holding company strategy and appoint more independent board members.

Elliott disclosed in April that it holds more than $1bn in shares in three key affiliates of Hyundai Motor Group and called for a “more detailed road map” on how the group will improve corporate governance, optimise balance sheets and enhance capital returns.

Stepping up its campaign against the car maker on Monday, Elliott said that it was unclear how the group’s restructuring plan would benefit minority shareholders.

The giant cars to steel group announced a plan in March to streamline its ownership structure, responding to calls from the government and investors for greater transparency and better governance at familycontrolled conglomerates.

“Elliott is encouraged that the group has acknowledged the need for an improved ownership structure. However, the unwinding of the current circular shareholding by itself … lacks clear benefits to minority shareholders,” Elliott said.

It said it held more than 1.5% of the common shares in each of the three key affiliates of the country’s second-largest conglomerate — Hyundai Mobis, Hyundai Motor and Kia Motors.

Hyundai said that it would continue to communicate with investors including Elliott to explain the goals and needs of its reorganisation plan.

It is Elliott’s latest challenge to South Korea’s family-run conglomerates after it forced Samsung Electronics to increase shareholder returns in 2017, and comes amid a government campaign to boost investors’ power in a country where shareholder activism is rare.

Elliott said that the Hyundai group should combine Hyundai Mobis with Hyundai Motor to create a holding company, and set up a clear policy for dividend payouts. “We believe this is truly a unique opportunity to unlock significant value in Hyundai Motor Group that the founding family and the leadership of the group have built over the decades,” Elliott said.

Elliott boasted of its “successful” 2016-17 campaign against Samsung Electronics, in which it also urged a restructuring of the business as a holding company. Samsung turned down Elliott’s push for the holding company structure, but instead boosted dividends and cancelled treasury shares.

Regardless of whether Hyundai adopts a holding company structure, Elliott demanded the cancellation of treasury shares in Hyundai Motor and Hyundai Mobis.

THE UNWINDING OF THE CURRENT CIRCULAR SHAREHOLDING … LACKS CLEAR BENEFITS