(ATTN: ADDS Truston Asset Management’s view in paras 12-13)
SEOUL, May 17 (Yonhap) — Hyundai Motor Co. President and Chief Executive Lee Won-hee on Thursday came forward to defend the parent conglomerate’s governance overhaul plan amid an escalating campaign of opposition by foreign investors.
“We strongly urge our shareholders to give full their support to Hyundai Motor Group’s corporate restructuring plan as it is the most transparent and optimal option needed to transform the group into a competitive and shareholder-friendly company,” Lee said in a statement.
The CEO made the comments in response to a stepped-up opposition drive by U.S. hedge fund Elliott and global proxy advisors who argue the plan is based on questionable business logic that is unattractive for shareholders in one Hyundai affiliate and reasonable for the other affiliate.
On Tuesday, Hyundai Mobis CEO Lim Young-deuk called for support from shareholders over the group’s governance reorganization plan.
In this photo taken on March 16, 2018, Hyundai Motor President & CEO Lee Won-hee delivers a speech at a shareholders’ meeting held in the carmaker’s headquarters in Yangjae, southern Seoul. (Yonhap)
In March, the world’s fifth-biggest automaking group announced that its auto parts supplier, Hyundai Mobis Co., will spin off its domestic module and after-sales parts businesses and merge them with logistics affiliate Hyundai Glovis Co.
Hyundai Mobis plans to focus on further beefing up its core auto parts operations and research and development activities, as well as on developing future growth drivers, such as autonomous vehicles and connected cars, after the streamlining process. The corporate restructuring plan has to be approved at shareholders’ meetings of Mobis and Glovis on May 29.
Last month, Korea Fair Trade Commission Chairman Kim Sang-jo cited Hyundai Motor’s case as “the most desirable” one for local conglomerates that are required to restructure their circular cross-shareholding structures largely aimed at strengthening family control.
But Elliott and proxy advisors, such as Glass Lewis and Institutional Shareholder Services, argued that Mobis shareholders won’t benefit from the plan, although Glovis shareholders will be better off due to the unfair share swap ratio.
For instance, an investor who has 100 Mobis stocks would receive 79 Mobis shares and 61 Glovis shares in the event of the overhaul program being passed, which the group says would benefit the investor, given their current share prices, as well as benefits of the growth of Mobis and Glovis.
“The swap ratio appears unfair for Mobis shareholders as the company’s module and after-sales parts businesses have contributed much to its bottom-line. The company’s future growth potential is also big compared to Glovis,” a foreign Hyundai investor who opposes the plan said by phone.
Elliott and the proxy advisors, including homegrown Sustinvest, demanded the Korean auto giant do more to enhance shareholders’ value by increasing dividends. They also called on the National Pension Service, a major investor in Hyundai affiliates, to vote against the restructuring plan later this month.
Later in the day, Truston Asset Management Co., a research-based local asset manager, came out to support Hyundai’s restructuring plan.
“We respect Hyundai’s push to resolve its circular cross-shareholding structure through the proposed spin-off merger program as we understand it appears to be the best option that can be taken by the company,” Truston said in a statement.
As of Thursday, foreigners own 47.73 percent of Hyundai Mobis, the group’s de facto holding company.
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