[Courtesy of Hyundai]
SEOUL -- Shares of Hyundai Motor and its parts-making affiliate Hyundai Mobis posted a modest rise Tuesday as investors reacted favorably to U.S. activist hedge fund Elliott Management's proposal for their merger to form a holding company that would govern the entire auto group.
The auto group has vowed to streamline its governance structure by splitting the module manufacturing and after-sales parts business of Hyundai Mobis to combine it with Hyundai Glovis, a logistics unit. Group Chairman Chung Mong-koo and his son, Vice Chairman Chung Eui-sun, will acquire all Hyundai Mobis shares held by Kia Motors, Hyundai Glovis and Hyundai Steel.
The chairman has been hesitant to create a holding company because his only son is not ready to succeed his father and take over. Elliott suggested a merger between Hyundai Motor and Mobis to create a holding company would result in a more efficient structure.
Elliott, which held more than 1.5 percent of the common stock in Hyundai Motor, Hyundai Mobis and Kia Motors, insisted Chung's scheme lacks business logic and undervalues the spun-off business of Hyundai Mobis. The fund also said selling Kia's shares in Hyundai Mobis to the ruling family lacks "a transparent process to realize fair value".
The fund urged Hyundai Motor, Kia and Hyundai Mobis to add independent directors to their boards to improve governance. "We find that there is still considerable progress to be made to reach global standards, especially in regards to its board composition and transparency, which lack diversity and non-executive directors' relevant industry experience outside of Korea."
Regulators have urged top family-run conglomerates, or chaebol, to reform their unfair business activities and reduce their market dominance. Samsung, Hyundai Motor, SK and LG groups have been put under strict surveillance.
Elliott once led foreign and minority shareholders in a campaign aimed at changing Samsung's corporate governance. In 2015, the fund launched a proxy vote war to prevent the merger of Samsung C&T and Cheil Industries, insisting it is aimed at expediting the transfer of group ownership to Vice Chairman Jay Y. Lee, the only son of the group's ailing patriarch Lee Kun-hee. Samsung narrowly won the battle to complete the merger.
reporter
Lim Chang-won
cwlim34@ajunews.com
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