Singer steps up pressure on Hyundai
SEOUL/NEW YORK: Elliott Management Corp, the activist fund headed by billionaire Paul Singer, escalated pressure on Hyundai Motor Group by saying the conglomerate’s planned 10.6 trillion won ($9.9 billion) merger of two units shortchanges some shareholders and lacks business logic.
Instead of spinning off divisions of a group supplier and merging them with its logistics firm, the US fund proposed that Hyundai Motor Co merge with parts maker Hyundai Mobis Co to form a holding company that would oversee the group.
In a presentation, Elliott also said group units should return more than 12 trillion South Korean won in excess cash to shareholders, raise dividends, and cancel treasury shares.
And the investor called for the companies to add new independent directors to each of their boards to improve governance.
“With Korea’s recent movement towards becoming a more transparent, open and investor-friendly jurisdiction, we believe that these proposals come at an opportune time for Hyundai Motor Group management to demonstrate its willingness to listen to shareholders’ demand for more equitable treatment,” Elliott said in a letter to company’s board on Monday.
The New York-based hedge fund said combining Hyundai Motor and Hyundai Mobis would create the seventh-largest automotive company in the world by assets.
Elliott said it would also provide “a significant margin uplift, and would bring further stability to the combined businesses’ profitability and catalyse a re-valuation by the market.”
The demands signal a looming battle between one of the world’s most tenacious activist investors and Korea’s second-largest business empire.
For Hyundai’s founding family, Singer’s investment comes at a particularly tricky time as the 80-year-old patriarch, Chung Mong-koo, prepares to hand over control of the conglomerate to his son.
“This is the start of a campaign to oppose Hyundai’s plan,” said Kim Joon-sung, an analyst at Meritz Securities Co in Seoul. “The restructuring plan is an urgent issue for Hyundai.”
In a statement, Hyundai Motor Group said it would “continuously communicate with shareholders and investors around the world including Elliott Management to explain the underlying goal and needs of the proposed restructuring plan.”
Elliott’s acquisition of more than $1 billion in stakes of three group units — Hyundai Motor, Kia Motors Corp and Mobis — was revealed this month, marking its return to Korea.
The firm said on Monday that it held more than 1.5% of the common stock in each of the companies.
Outside of Korea, Singer is well known for his legal tussles with Argentina after he sued the country for its 2001 default on $95 billion of debt.
He has also targeted the world’s biggest mining company BHP Billiton Ltd, taken on Warren Buffett in a battle for Texas’s largest electricity distributor.