Elliott demands demerger of Hyundai Mobis
By Nam Hyun-woo
U.S. activist fund Elliott has issued a fresh governance reform proposal to Hyundai Motor Group (HMG), demanding the group “demerger” its auto parts unit Hyundai Mobis.
In an Aug. 14 letter made public Friday, Elliott said: “Despite our repeated call for enhanced capital returns, optimized financial structure, and transparent governance structure that received support from both shareholders and the market, HMG has yet to take any substantive steps to address the concerns that continue to burden HMG and its share value.”
In the latest proposal, Elliott demanded the demerger of Mobis into module and core-parts business, and after-sale services business, and the merger the former business into Glovis and the latter into Hyundai Motor Company, meaning the breakup of Hyundai Mobis.
After the demerger, Elliott called for Hyundai Motor to purchase shares from Kia Motors and the owner family to simplify its structure.
Also, Elliott urged HMG to establish a “Restructuring Review Committee” inviting shareholders to “drive improving corporate structure, optimize capital management and shareholders returns, and enhance the boards of HMG's affiliates with diversity and expertise,” as well as demanding a stronger dividend policy.
Hyundai Motor Group said it “rejected Elliott's proposal because of legal limits,” without elaborating further.
Analysts say Hyundai rejected the fresh proposal because it does not resolve regulations on unfair internal trading and restructuring for long-term growth was absent.
Criticism is also mounting that Elliott used the media by disclosing the letter to buoy the Hyundai company stocks it has. Elliott revealed in the letter that it owns a 3 percent stake in Hyundai Motor, 2.1 percent in Kia Motors and 2.5 percent in Mobis.
In May, HMG withdrew its March 28 governance restructuring plan aimed at breaking its circular shareholding and improving its corporate governance.
Under the plan, the group planned to start restructuring by spinning off Mobis' lucrative modules and after-service divisions and merging them with the logistics unit Hyundai Glovis.
The remaining Mobis was supposed to become a controlling firm with the focus on developing technologies such as self-driving and connectivity.
The withdrawal came after an opposition campaign led by Elliott, which demanded a stronger dividend policy and a revaluation of Mobis. Elliot then said it owned a more than 2.5 percent stake.