SEOUL, April 5 (Yonhap) — The chief of South Korea’s financial regulator on Thursday said he views Elliott Advisors Ltd.’s demands for more efforts to improve corporate governance at Hyundai Motor Group differently from Elliott’s intervention in the merger of two Samsung Group affiliates three years ago.
In a venture startup fund event held in Seoul, Financial Services Commission Chairman Choi Jong-ku told reporters, “South Korean companies must have learned some lessons from the disputes between Samsung and Elliott over the conglomerate’s merger plan (between Samsung C&T Corp. and Cheil Industries Inc.).”
Given that the purposes of pension funds, which seek long-term gains, and hedge funds, which aggressively seek higher, short-term returns, are different, companies need to better communicate with investors and their shareholders to ensure growth, he said.
In this photo taken April 5, 2018, FSC Chairman Choi Jong-ku gives the opening speech at an event held by a venture fund in Yeouido, Seoul. (Yonhap)
In 2015, when Samsung Group pushed for the merger of affiliates Samsung C&T and Cheil Industries, U.S. activist hedge fund Elliott Management Corp. filed a series of lawsuits to block the move. The following year, it also asked Samsung Electronics Co. to simplify its operations and increase shareholder returns.
Elliott Management increased its stake in Samsung C&T to 7.12 percent from 4.95 percent one week after Samsung’s announcement of the merger plan on May 26. The U.S. hedge fund made it clear that the additional stake purchase was for its participation in the management of the top Korean conglomerate.
On Wednesday, Elliott Advisors, a hedge fund sponsor subsidiary of the U.S. fund, called on Hyundai Motor Group to step up its efforts to overhaul its governance structure after announcing it had acquired more than US$1 billion (1.05 trillion won) worth of stocks in three key affiliates of the Korean automotive group.
“While this step is encouraging, more needs to be done to benefit the companies and stakeholders,” Elliott said in a statement. The hedge fund sponsor also called for a detailed roadmap to further enhance the Korean auto giant’s corporate governance, optimize balance sheets, and enhance capital returns at Hyundai affiliates.
Elliott Advisors said in the statement it looks forward to engaging with management and other shareholders directly on these issues and offering recommendations regarding the proposed plan.
In response, Hyundai said it will make continued efforts to enhance shareholder value and the worth of its affiliates, while focusing on better communicating with shareholders.
Elliott Advisors is estimated to own a combined 1.4 percent stake in Hyundai Motor Co., Kia Motors Corp. and Hyundai Mobis Co.
Unlike its disruption of the Samsung affiliates merger, Elliott is not likely to affect Hyundai’s spinoffs and merger plans with its relatively small stake in the Hyundai affiliates, industry watchers said Thursday.
Last week, Hyundai Motor Group announced that auto parts supplier Hyundai Mobis will spin off its domestic module and after-sales parts businesses and merge them with logistics affiliate Hyundai Glovis Co.
After the spinoff and merger, Hyundai Mobis plans to focus on further beefing up its core auto parts operations and R&D business and developing future growth drivers like autonomous vehicles and connected cars.
Moreover, large shareholders, such as Hyundai Motor Group Chairman Chung Mong-koo and his heir apparent Vice Chairman Chung Eui-sun, plan to acquire all Hyundai Mobis shares held by Kia Motors Corp., Hyundai Glovis and Hyundai Steel Co. to simplify the group’s governance structure.
Kia, Hyundai Glovis and Hyundai Steel currently own 16.9 percent, 0.7 percent and 5.7 percent stakes, respectively, in Hyundai Mobis.
The move comes after the country’s antitrust regulator asked the group to come up with a concrete plan to overhaul its complicated shareholding structure among affiliates by the end of March.
All the plans are subject to approval at Hyundai Mobis and Hyundai Glovis general shareholder meetings scheduled for May 29.
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