Elliott versus Hyundai to be voted on today

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Elliott versus Hyundai to be voted on today

U.S. hedge fund Elliott Management urged Hyundai Motor Group shareholders to side with its proposals for the company on the eve of the Korean automaker’s annual general meeting.

In an open letter to shareholders of Hyundai Motor and its auto parts affiliate Hyundai Mobis, Elliott argued that Hyundai needs to stop underperforming by changing the group’s governance structure and capital management. It asked shareholders to support all of its proposals to improve Hyundai’s balance sheet and accountability.

“Change has not come fast enough, and it has not come on a scale commensurate to the Group’s issues,” Elliott said in the letter. “Nonetheless, [Hyundai shareholders] have a genuine choice between the unsustainable status quo and real change in the areas of capital management and corporate governance.”

Elliott said Hyundai let its competitors get ahead by wasting money on real estate and non-core asset investments. Poor decisions like the acquisition of a plot of land in Seoul from Korea Electric Power for 10.6 trillion won ($9.3 billion) led to a period of underperformance, Elliott said.

“Since the deal was announced, HMC’s [Hyundai Motor Company] share price has fallen by 43 percent, and Mobis’s has fallen by 24 percent compared with the Kospi’s +6 percent,” Elliott wrote. “Neither share price has recovered.”

The hedge fund contended that minority shareholders suffered the most from Hyundai’s mistakes. It estimated the National Pension Service (NPS) may have lost 2 trillion won in Hyundai Motor and 800 billion won in Mobis over the past four and a half years.

Hyundai Motor Group declined to comment on Elliott’s letter Thursday.

Elliott is demanding that Hyundai Motor and Hyundai Mobis pay a combined 8.3 trillion won in dividends this year.

It argues that the two companies have more than 31 trillion won in cash and can afford greater dividends.

Bashing the “excessive” calls, Hyundai Motor instead offered to pay 1.1 trillion won to shareholders last year, and Hyundai Mobis offered to do the same but spread the amount over the next three years.

The NPS and five key overseas pension funds sided with Hyundai’s proposal. Several proxy advisory firms also pushed back on Elliott’s dividend demand, offering their support to the Korean automaker.

On top of demanding greater dividends, Elliott also said the two Hyundai companies should increase the size of their boards and proposed five outside director nominees.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]
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