Elliott demands Hyundai Motor do more for shareholders

Paul Singer, founder and CEO of Elliott Management

By Park Jae-hyuk

Elliott's announcement on Hyundai Motor Group's governance reform plan is not seen as a provocation, because it differs from the U.S.-based firm's previous interference in a merger of Samsung C&T with Cheil Industries, analysts said Wednesday.

Earlier in the day, the activist fund tried to show its “influence” over Korea's business circles again, through a surprising announcement on its significantly large stakes in three affiliates of the nation's largest automotive group ― Hyundai Mobis, Hyundai Motor and Kia Motors.

Considering the U.S. investor's opposition to the merger of the two Samsung affiliates in 2015, some regarded Elliott's statement as a declaration of war against Hyundai.

Elliott said while the reform plan is encouraging, more needs to be done to benefit the companies and stakeholders.

However, the market has put more emphasis on the word “welcome,” included in the press release's title.

“As a major investor, we are pleased that Hyundai Motor Group has taken the first step towards an improved and more sustainable corporate structure,” Elliott said in its press release.

Samsung Securities analysts Lim Young-eun said: “Elliott demanded Samsung Electronics be spun off, when it opposed the merger of Samsung C&T and Cheil Industries, but it has been in favor of Hyundai's reform plan, saying it welcomes Hyundai's acknowledgment of needed reforms.”

The analyst anticipated a rise in Hyundai Motor Group's shares, given Elliott mentioned improvements in corporate governance, optimization of balance sheets and enhanced capital returns.

As she expected, shares of Hyundai Mobis, Hyundai Motor and Kia Motors surged Wednesday.

Daishin Securities analyst Yang Ji-hwan has dismissed expectations of a conflict between Elliot and Hyundai, saying the former welcomed the latter's decision and just demanded a more detailed roadmap.

Chung Sun-sup, chief executive of local consultancy Chaebul.com, also said the latest announcement from Elliott did not criticize the ownership streamlining.

“It just requested shareholder-friendlier approaches to the automotive group,” he said. “Hyundai may need to come up with a schedule for the market to predict the forthcoming measures.”

Hyundai Motor Group said it will try its best to enhance capital returns to investors and will continue to communicate with domestic and foreign shareholders.

Last month, the group came up with a governance reform plan to end its circular ownership structures, saying the chairman and vice chairman will sell all of their stakes in Hyundai Glovis to Kia Motors to secure funds for purchasing a stake in Hyundai Mobis.