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MarketScreener Homepage  >  Equities  >  Korea Stock Exchange  >  Hyundai Motor Company    A005380   KR7005380001


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U.S. Activist Investor Elliott Loses Hyundai Proxy Fight

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03/22/2019 | 12:38am EDT

By Eun-Young Jeong

SEOUL--U.S. hedge-fund manager Elliott Management Corp. lost its battle to boost dividends and gain board seats at South Korean auto giant Hyundai Motor Group, highlighting the challenge activist firms face in proxy fights with Asia's family-run businesses.

The setback follows a victory last year against Hyundai, when the conglomerate called off a corporate restructuring that Elliott said lacked business rationale and hurt shareholders. New York-based Elliott, founded by billionaire Paul Singer, is one of the biggest shareholder activists globally, with around $35 billion in assets.

In Asia, Elliott previously targeted South Korea's largest conglomerate, Samsung, and Hong Kong's Bank of East Asia, with mixed results.

On Friday, shareholders at Hyundai Motor Co. and its auto-parts affiliate Hyundai Mobis Co. rejected Elliott's proposals for one-time dividends totaling 7 trillion South Korean won ($6.2 billion), more than four times what the two companies' boards proposed. The two publicly traded companies form part of Hyundai Motor Group, which isn't itself listed.

"Elliott's proposals were too extreme," said Lee Sung-won, vice president at Truston Asset Management, a longtime investor in both Hyundai companies. Mr. Lee said he couldn't side with Elliott despite his dissatisfaction with the dividend plan offered by Hyundai Mobis's board. He had no objections to the Hyundai Motor board's plan.

Elliott's dividend proposals got 13.6% of the vote at Hyundai Motor and 11% at Hyundai Mobis. Shareholders also sided with the two companies' combined five independent board nominees.

Elliott, which as of November held stakes of 3% in Hyundai Motor and 2.5% in Hyundai Mobis, accentuated the positive. "Elliott is encouraged by the support that the shareholder proposals received from independent shareholders of HMC and Mobis," said a spokesman for the hedge fund. "We are confident that the future holds further improvements at Hyundai."

Elliott is expected to seek a voice in the South Korean auto maker's coming restructuring, which many investors view as part of an effort by the Chung family to transfer ownership of Hyundai from father to son. It will require a two-thirds approval from shareholders, a higher threshold than the majority needed in Friday's dividends votes. The Chung family can exercise control over roughly 30% of shares at the two Hyundai affiliates.

In making a case for the larger dividends, Elliott argued that Hyundai's cash reserves exceed the industry average and are poorly managed. In 2018, Hyundai Motor recorded a net cash balance of 12.7 trillion won; Hyundai Mobis, 7.4 trillion won. Combined, Hyundai Motor and affiliate Kia Motors are the world's fifth-largest car maker.

Hyundai said it needs the cash for new investments, such as outside acquisitions or self-driving car technology, and both affiliates pledged last month to boost shareholder returns.

The share prices of Hyundai Motor and Hyundai Mobis have dropped 18% and 16%, respectively, since Elliott announced its ownership positions in April.

This clash is the latest in a series between Elliott and a family-run Asian company. In Hong Kong, it has engaged in a multiyear battle to force Bank of East Asia, run by chairman and chief executive David Li, to sell itself.

In South Korea, Elliott narrowly lost a 2015 proxy fight against Samsung over a merger that helped the conglomerate's third-generation heir cement control over Samsung Electronics Co., the world's largest smartphone maker. But Samsung Electronics, which Elliott later took a stake in, has since boosted dividends and share buybacks.

Now multiple shareholder activist campaigns not involving Elliott are unfolding in South Korea.

"Companies are now making more efforts to communicate and listen to shareholder demands," said Kim Yun-kyung, corporate research director at Korea Economic Research Institute.

Shareholder activism has surged in Asia, with more than 10 times as many campaigns in 2017 as in 2011, according to a J.P. Morgan report, reflecting growth in foreign shareholdings and local regulations promoting corporate governance.

Mary Ryu contributed to this article.

Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
EXTREME CO.,LTD. -4.25% 1532 End-of-day quote.-21.44%
HYUNDAI MOBIS CO.,LTD -2.53% 192500 End-of-day quote.-24.80%
HYUNDAI MOTOR COMPANY -1.31% 98300 End-of-day quote.-18.42%
JOYY INC. -1.18% 83.7 Delayed Quote.58.55%
JUST GROUP PLC 2.25% 49.06 Delayed Quote.-37.90%
LINE CORPORATION -0.54% 5500 End-of-day quote.2.80%
SEEK LIMITED -0.70% 21.42 End-of-day quote.-5.01%
THE BANK OF EAST ASIA, LIMITED -1.88% 17.7 End-of-day quote.1.72%
WILL GROUP, INC. -2.52% 618 End-of-day quote.-50.64%
WORLD CO., LTD. -5.40% 1420 End-of-day quote.-47.23%
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Sales 2020 100 717 B 83,9 B 83,9 B
Net income 2020 2 516 B 2,10 B 2,10 B
Net Debt 2020 56 664 B 47,2 B 47,2 B
P/E ratio 2020 9,68x
Yield 2020 3,99%
Capitalization 20 925 B 17 431 M 17 430 M
EV / Sales 2019
EV / Sales 2020 208x
Nbr of Employees -
Free-Float 71,0%
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