Hyundai Drops $8.8 Billion Restructuring Plan

Hyundai Motor Corp. has dropped a proposed $8.8 billion merger involving two of its affiliates because of opposition by activist hedge fund Elliott Management Corp.

Hyundai’s board planned to merge its Hyundai Mobis partsmaking unit into its Hyundai Glovis logistics company as a first step in simplifying the group’s complex cross-ownership structure. The plan had been scheduled for a shareholder vote on May 29.

Under the group’s existing circular ownership structure, Hyundai Mobis owns 20.8% of Hyundai Motor, which owns 33.9% of Kia Motors, which owns 16.9% of Hyundai Mobis.

Elliott and other funds argued that the proposed Mobis-Glovis merger made little strategic sense and would benefit Hyundai’s founding Chung family at the expense of other shareholders. Elliott has proposed instead that Hyundai simply combine Mobis with Hyundai Motor.

Hyundai CEO Young-Deuk Lim told investors in a letter earlier today that the board will return at a later date with a new restructuring proposal.