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Hyundai set for Elliott showdown as it rejects USD 6.3 billion payout call

Opposition from Elliott led Hyundai to drop an earlier attempt to overhaul its ownership structure and executive vice-chairman Euisun Chung.

Seoul: Hyundai Motor Group on Tuesday rejected demands by U.S. activist investor Elliott Management for a combined 7 trillion won (USD 6.3 billion) dividend payout and new board members, complicating efforts to revamp South Korea’s second-biggest conglomerate.

Opposition from Elliott led Hyundai to drop an earlier attempt to overhaul its ownership structure and executive vice-chairman Euisun Chung pledged in January to complete a restructuring expected to pave the way for him to succeed his father Mong-Koo Chung as group chairman.

“I think Elliott expected that its proposals would be rejected by Hyundai. Its purpose is to rally support from other shareholders for a vote on a restructuring plan,” Park Ju-gun, head of corporate analysis firm CEO Score, said.

Elliott, which was not immediately available for comment, had proposed a 2018 dividend of 4.5 trillion won for Hyundai Motor and 2.5 trillion won for auto parts supplier Hyundai Mobis, regulatory filings show.

The two had proposed payouts of nearly 1 trillion won.

Hyundai will hold an annual shareholders meeting on March 22, when shareholders will vote on dividend and board members.

The group is expected to come up with a revised proposal, which is expected to be put to a vote at extraordinary shareholders meeting in April or May, Park said.

Hyundai Motor said in a regulatory filing that the dividend proposed by Elliott would lead to a “massive cash outflow,” hurting future investments and shareholder value.

Hyundai Mobis also said it would “undermine its future competitiveness” as it needs to invest more than 4 trillion won to develop new vehicles over the next three years.

Instead Hyundai Mobis announced a 2.6 trillion won shareholder return package over the next three years, less than Elliott’s demand for at least 4 trillion won.

The Hyundai Mobis package includes dividends worth 1.1 trillion won, a buyback of stock worth 1 trillion won and a cancellation of 460 billion won worth of shares.

It said it will appoint former Opel Chief Executive Karl-Thomas Neumann, and Brian Jones, co-president at Archegos Capital Management, as outside board directors.

Hyundai Motor said it will also add foreigners as outside board directors, while appointing president Albert Biermann, a former BMW executive, as a new board member.

Hyundai Mobis and Hyundai Motor also announced plans on Tuesday to appoint Euisun Chung as co-CEO. Mong-Koo Chung will remain as co-CEO of the two companies.

( Source : reuters )
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