[Newsmaker] FSC chief plays down concerns on Elliott’s return

Amid growing speculation on US activist hedge fund Elliott Management’s move towards Hyundai Motor Group, the chief of the nation’s top financial regulator on Thursday urged stakeholders not to react “sensitively,” stressing this time seems different from the group’s previous battles with Samsung.

“There’s no need to sensitively respond to Elliott’s move this time,” said Choi Jong-ku, chairman of the Financial Services Commission, at a conference in Seoul.

Referring to a series of legal battles in which the US hedge fund engaged against Samsung’s plan to merge two affiliates in 2015, Choi said the latest move targeting the South Korean auto giant appears to be a part of efforts to promote “smooth communication” between the company and shareholders. 

“South Korean conglomerates may have learned many lessons from (the past) disputes between Samsung and Elliott,” he said. “We need (to find a way of) communication that suits their investment strategy.”

The remarks came a day after a surprise announcement by Elliott that demanded the automaker improve corporate governance and capital returns.

The US fund also said, for the first time, that it holds more than $1 billion of common stock in the group’s de facto holding company Hyundai Mobis and two auto brands, Hyundai Motor and Kia Motors, via its Hong Kong unit, Elliott Advisors. It is unknown how many shares Elliott holds in each unit.

Elliott’s unexpected move raised market concerns, with many recalling the US fund’s failed attempt to block a merger between Samsung C&T and Cheil Industries.

The merger was widely seen as the chairman’s only son, Lee Jae-yong, consolidating his control over the Samsung empire. Elliott claimed it was carried out at the shareholders’ expense, and brought the case to court while securing 7.1 percent holding in Samsung C&T. The court rejected Elliott’s appeal, concluding the deal didn’t represent an illegal transfer of value to the controlling family. A year after losing the trial, the US fund again demanded Samsung Electronics split the company into holding and operating companies and list the former on Nasdaq.

Now with Elliott turning toward Hyundai, the second-largest Korean conglomerate after Samsung, the market remains suspicious.

But some analysts have urged caution over rumors of Elliott taking aggressive action, noting a change in tone.

“Elliott was against the merger between Samsung C&T and Cheil Industries, but it specifically said that it welcomes Hyundai’s governance restructuring plan,” said Im Eun-young, an analyst at Samsung Investment and Securities.

Last week, Hyundai Motor Group released a structural overhaul plan to spin off Hyundai Mobis’ lucrative businesses and merge them with Hyundai Glovis, the group’s logistics arm.

The scheme, according to the group, is aimed at improving the transparency of its governance structure and bolstering shareholder value. The deal still needs approval from shareholders. Under the plan, four out of nine cross-shareholding links would be removed, addressing public concerns over fair market competition that center on years of interaffiliate trading.

Speculations remain that the spinoffs could benefit the controlling family, with some urging the company to explain how it would be good for its corporate governance.

The distribution ratio for the spinoff merger between Hyundai Mobis and Hyundai Glovis was measured at 0.61:1. This means that for every 100 shares of Hyundai Mobis, stockholders would receive 61 new shares of Hyundai Glovis after the overhaul.

By Cho Chung-un (christory@heraldcorp.com)