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Hyundai overhaul hits another roadblock with ISS opposition

Reuters  |  SEOUL/NEW YORK 

By and B. Baker

SEOUL/NEW YORK (Reuters) - Opposition to Motor Group's proposed new ownership structure grew on Tuesday with two urging investors to reject a plan they said would benefit family members but not minority shareholders.

ISS joined and U.S. hedge fund Elliott in opposing the plan for Mobis, citing a "lack of compelling business justification" and "valuation that appears to be unfavorable for company shareholders."

Under the deal announced in March, would spin off its module and after-service parts businesses, which would then be merged with logistics firm Co Ltd.

and his son then plan to sell their shares in to buy stakes in Mobis, consolidating their holdings and laying the groundwork for a father-to-son succession.

But ISS, Glass Lewis, Elliott and others say that is selling the businesses too cheaply and that shareholders will be left short-changed.

"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," ISS said in a report.

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

The proposed terms are "profoundly unattractive for Mobis shareholders, yet more than reasonable for existing shareholders," said in a report.

CASTING VOTE

said in a statement that it disagreed with the ISS conclusions, which "fail to recognize the substantial value this transaction will create for Hyundai Mobis' shareholders".

"strongly recommends stockholders vote FOR the proposed spinoff and merger with Glovis," it said, saying the deal is "in the best interest of all stockholders."

said it "did consider alternative structures, such as holding company structures," but the structures have "significant regulatory and management hurdles".

It remains to be seen whether there is sufficient opposition to derail the deal at a May 29 vote. Two-thirds of votes by Hyundai Mobis shareholders present need to be in favour of the deal for it to be successful.

Foreign shareholders own nearly half of Mobis, which is set to be the group's de facto holding firm, but Hyundai's and the group's affiliates own around 30 percent.

Lee Jae-il, an at & Securities, said the vote could depend on the position of fund and that Elliott would have less clout than in other battles it has waged in as it is not that big a shareholder in Mobis.

"The NPS, which has a stake of almost 10 percent, has the casting vote, and if it does not oppose the plan, there is a higher chance that the deal will get approval," he said.

NPS declined to comment.

The of South Korea's antitrust agency, Kim Sang-jo, has said the plan was a "positive" step towards improving the group's ownership structure.

Last month, Elliott, which owns more than 1.5 percent of Mobis, proposed what it called a more efficient holding company structure and more independent board members.

Hyundai Motor and Hyundai Mobis have since announced share buybacks and cancellations in the hope of bringing shareholders on side. But Elliott has said these do not go far enough to address corporate governance issues.

(Reporting by in Seoul and Baker in New York; Editing by and Alexander Smith)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, May 15 2018. 18:29 IST
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