Seoul: The showdown between US activist hedge fund Elliott Management and Hyundai Motor Group is set to come to a head on Friday when shareholders gather to vote on the fund’s demands for a hefty special dividend and a board shake-up.
Elliott’s challenge to South Korea’s second-biggest family-run conglomerate is the latest example of shareholder activism in Asia’s fourth-biggest economy, long dominated by powerful cliques that took minority investors for granted.
The activist fund founded by billionaire Paul Singer tasted success last year when it and other investors opposed Hyundai’s ownership restructuring plan on the basis that it would favour family members rather than minority shareholders.
While it looks likely to fail on most counts on Friday, even if it manages to gain a single seat at Hyundai it would be a major victory for shareholder empowerment in the country.
Elliott is trying to rally shareholder support for dividend payouts from Hyundai Motor and Hyundai Mobis for 2018 worth a combined 7 trillion won ($6.2 billion), saying the group should dispose of its excess capital.
That is more than six times higher than the $1 billion in payouts offered by the Hyundai affiliates, which say Elliott’s proposals would hamper future investments and acquisitions.
Elliott has also demanded a total of five board nominees at Hyundai Motor and Hyundai Mobis to address “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 said in the letter to shareholders on Thursday.
The campaign received a potentially fatal blow last week when South Korea’s National Pension Service, the second-biggest shareholder in the two firms, said Elliott’s demands were “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 of the members of the NPS panel which made the decision to vote against the proposals, told Reuters. “Elliott’s strategy has failed. It was short-sighted.”
The NPS holds stakes of 8.7 per cent and 9.45 per cent in Hyundai Motor and Hyundai Mobis, respectively. About 30 per cent of the two firms are owned by Hyundai affiliates and family members. Resolutions require approval from a majority of the votes of shareholders present at the meetings.
As of November, Elliott held more than 2.5 per cent of common stock in Hyundai Mobis, 3 per cent in Hyundai Motor and 2.1 per cent in affiliate Kia Motors.
