Hyundai Motor heir gets rid of Elliott risk

The road to Hyundai Motor Group Executive Vice Chairman Chung Euisun reigning over the nation’s largest automobile giant is predicted to be less bumpy as activist hedge fund Elliott, which had put the brakes on his succession plans, recently sold all its stakes in Hyundai Motor companies.

According to the industry, Elliott sold its stakes of 2.9 percent of Hyundai Motor, 2.1 percent of Kia Motors and 2.6 percent of Hyundai Mobis as of Wednesday.

Elliott’s departure is expected to give an opportunity for the automaker to re-push the original proposal of the group’s reorganization plan.

In 2018, Hyundai had announced it would split Mobis’ module and after-sales parts businesses and merge them with Glovis, which was accepted by the nation’s antitrust watchdog but was opposed by Elliott. The US hedge fund had asked the automaker to combine Hyundai Motor with Mobis instead to switch to a holding firm system to simplify the governance structure and to pay high dividends worth 8.3 trillion won ($7.1 billion).

However, for Chung Euisun’s smoother succession, the merger of Mobis and Glovis is essential because he currently does not have any stakes in Mobis, the de facto holding firm of the automotive group. Mobis is the largest shareholder of Hyundai Motor with a 21.43 percent stake. Hyundai Motor is then the largest shareholder of Kia Motors with a 33.88 percent stake.

Currently, the heir has a 23.29 percent stake in Hyundai Glovis, 2.35 percent in Hyundai Motor and 1.74 percent in Kia Motors.

Lim Jin-soo, a director at privately run institute Korea Corporate Governance Service, said, “Hyundai Motor is likely to pursue the original proposal with a slight revision as the proposal had been approved by the government.

“If the revised proposal is designed to be more shareholder-friendly considering the current stock situation, it is likely to be accepted by the market.”

The original distribution ratio for the spin-off merger between Hyundai Mobis and Hyundai Glovis was measured at 0.61:1. This means that every share of Hyundai Mobis stockholders would receive 0.61 new shares of Hyundai Glovis after the overhaul.

Hyundai Motor’s spokesperson said, “The firm will pursue governance restructuring based on market conditions and shareholder opinions.”

In May last year, Chung Euisun said he was considering “many options to please its investors,” on the future of the group’s governance at an event organized by the Carlyle Group in Seoul.

“I try to listen to our investors as much as possible,” he said. “Investors and the company ultimately share the same goal: to maximize profit.”

Hyundai Motor Group is the only one among the nation’s top five groups that has not found a solution to its circular shareholding structure. 

By Shin Ji-hye (shinjh@heraldcorp.com)