U.S. Activist Unveils Plan to Reform Hyundai’s Structure

Hyundai Motor Group could unlock at least 50% more value by ending the circular ownership among its Hyundai Motor, Kia Motors and Hyundai Mobis units.

So claims Elliott Management Corp., the New York City-based investment fund led by activist Paul Singer. Earlier this month Elliott revealed it has acquired a stake of more than $1 billion in Hyundai. Its restructuring plan challenges one announced in March by the groups founding Chung family.

Hyundai shareholders will consider the two plans on May 29.

As currently structured, parts supplier Hyundai Mobis owns 20.8% of Hyundai Motor, which owns 33.9% of Kia Motors, which owns 16.9% of Hyundai Mobis.

The Chung family proposes to spin off Hyundai Mobis and merge it with Hyundai Glovis logistics, a company partly owned by the family. Elliott has described that plan as a “first step” that fails to address needed improvement in corporate governance and financial transparency.

The fund is pushing a plan for Hyundai Mobis and Hyundai Motors to merge, which would sharply reduce cross ownership. Elliott also proposes that the company carry less cash on its balance sheet, begin paying dividends based on net income rather than free cash flow and add several independent members to its board.