Hyundai set for Elliott showdown as it declines $6.3 billion payout call

Elliott Management

Hyundai Motor on Tuesday declined demands by U.S. activist investor Elliott Management for a total 7 trillion won ($6.3 billion) dividend payout and new board members, complicating attempts to renovate South Korea’s second-biggest conglomerate.

Opposition from Elliott led Hyundai to drop a previous attempt to restructure its ownership structure and executive vice-chairman Euisun Chung pledged in January to finish a restructuring expected to make the way for him to succeed his father Mong-Koo Chung in becoming group chairman.

“I think Elliott expected that its proposals would be declined by Hyundai. Its purpose is to rally support from other shareholders for a vote on a restructuring plan,” Park Ju-gun, head of corporate analysis firm CEO Score, stated.

Elliott, which was not right away available for comment, had proposed a 2018 dividend of 4.5 trillion won for Hyundai Motor and 2.5 trillion won for auto parts provider Hyundai Mobis, regulatory filings reveal.

The two had proposed payouts of almost 1 trillion won.

Hyundai is set to hold an annual shareholders meeting on March 22, when shareholders are going to vote on dividend and board members.

The group is expected to come up with a modified proposal, which is expected to be put to a vote at extraordinary shareholders meeting in April or May, Park stated.

Hyundai Motor stated in a regulatory filing that the dividend proposed by Elliott would result in a “massive cash outflow,” harming future investments and shareholder value.

Hyundai Mobis also stated it would “undermine its future competitiveness” as it needs to invest over 4 trillion won to develop new vehicles during the next three years.

Instead Hyundai Mobis declared a 2.6 trillion won shareholder return package for the next three years, less than Elliott’s demand for no less than 4 trillion won.

The Hyundai Mobis package consists of dividends worth 1.1 trillion won, a buyback of stock worth 1 trillion won and also a cancellation of 460 billion won worth of shares.

It said it is going to appoint former Opel Chief Executive Karl-Thomas Neumann, and Brian Jones, co-president at Archegos Capital Management, as outside board directors.

Hyundai Motor stated it will also include foreigners as outside board directors, while appointing president Albert Biermann, a former BMW executive, as a new board member.

Hyundai Mobis and Hyundai Motor also discussed strategies on Tuesday to appoint Euisun Chung as co-CEO. Mong-Koo Chung is going to remain as co-CEO of the two firms.

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