Hyundai auto group accuses U.S. proxy adver ISS of misleading market

Lim Chang-won Reporter Posted : 2018-05-16 14:03 Updated : 2018-05-16 14:03
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SEOUL -- South Korea's Hyundai auto group voiced regret and denounced U.S. proxy adviser Institutional Shareholder Services (ISS) for misleading the market by opposing the group's scheme to streamline its complicated governance structure.

The group will split the module manufacturing and after-sales parts business of its parts-making unit Hyundai Mobis to combine it with Hyundai Glovis, a logistics unit. The plan requires approval at a meeting of Hyundai Mobis shareholders on May 29.

U.S. activist hedge fund Elliott, which holds more than 1.5 percent in the combined stock of Hyundai Mobis, Hyundai Motor and its affiliate Kia Motors, called for a complete merger between Hyundai Motor and Hyundai Mobis to create a holding company. The fund urged other shareholders to oppose Hyundai's restructuring plan.

ISS recommended that shareholders vote against Hyundai's plan: "The transaction presents an attractive opportunity for the controlling shareholder to lay the groundwork for resolving the circular ownership issues within the group and the related party concerns at Glovis, while retaining firm control over group companies."

"In contrast, the rationale for unaffiliated Mobis shareholders to support this proposal appears less-than-compelling," the proxy adviser said.

In a statement on Wednesday, the auto group insisted that Hyundai Mobis shareholders would benefit from its restructuring scheme because the parts maker can focus on core operations and technologies. "We feel regret at ISS's decision which is a serious mistake and misleads the market," it said in a statement.

Another U.S. proxy adviser, Glass Lewis, supported Elliott and expressed concerns that Hyundai's restructuring plan will be approved by shareholders if the National Pension Service (NPS) votes for it.

The group's friendly shares stand at 30.2 percent, including 16.9 percent held by Kia, 7.0 percent by Chung Mong-koo and 5.7 percent by Hyundai Steel. Foreigners control 48.6 percent while the state pension fund owns 9.8 percent.

In 2015, Elliott launched a proxy vote war to prevent the merger of two Samsung units, insisting it is aimed at expediting the transfer of group ownership to Samsung Electronics 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, helped by support from the pension fund. Elliott now seeks more than 670 million US dollars in compensation for losses caused by alleged unlawful government intervention in the 2015 merger.