Korean asset firm backs Hyundai reform plan; NPS remains indecisive

An independent South Korean investment firm has become the first institutional shareholder in Hyundai Mobis Co. Ltd. publicly supporting the Hyundai Motor Group’s restructuring plan, rejecting recommendations by US and South Korean proxy advisers to oppose the spin-off and merger plan.

The announcement on May 17 by Truston Asset Management Co. Ltd. heralds a contentious battle at a May 29 vote and adds to the uncertainty over the auto giant’ proposed restructuring, with National Pension Service (NPS), No. 2 shareholder of Mobis with a 9.8% stake, remaining indecisive.

NPS, which is believed to hold a casting vote on the plan, is expected to ask its advisory committee composed of seven university professors and two capital market experts to make a decision on its behalf, in a bid to improve the independence of its decision making on controversial issues.

To streamline the circular ownership structure, auto parts maker Mobis plans to move its aftersales and module businesses to car shipping and logistics company, Hyundai Glovis Co. Ltd.

Then its chairman Chung Mong-koo and his son plan to sell their shares in Glovis to buy 23.3% of Mobis from affiliate companies. Sang-jo Kim, the country’s antitrust body chief, had said it was a positive step toward improving its ownership structure.

“It’s difficult to find a better governance structure than this one. The spin-off and merger ratios do not destroy the existing shareholders’ value,” Sung Won Lee, vice president of Truston Asset.

Lee added that Elliott Management Corp.’s demand for the automotive group shifting to a holding company structure is in breach of domestic laws, without elaborating further.

NOT ENOUGH VOTES YET

The founding family and affiliate companies of the Hyundai Motor Group have a combined 30.17% in Mobis, while foreign shareholders own 48.57%.

Excluding NPS’ stake, Korean institutional investors and minority shareholders represent 8.73% as at end-2017.

Some of domestic investment firms also have decided to vote in favor of the plan, according to market sources.

Still, Hyundai Motor Group seems to have not secured enough votes to win the battle, in the face of opposition from major proxy advisors.

Korea Corporate Governance Service, a proxy advisor of NPS, recommended on May 17 that shareholders vote against the plan, joining ISS and Glass Lewis and US activist fund Elliott Management. They claimed the plan would not benefit minority shareholders.

With shareholder meetings of both Mobis and Glovis due on May 29, doubt rises about whether the NPS’ advisory body will be able to make a decision in consideration of the corporate value and merger synergies of the two Hyundai units.

“All eight members feel very pressured,” said one of the advisory committee members. He excluded the chairman of the nine-member body.

“With just 10 days ahead of the shareholder meetings, it’s actually impossible for those private sector members to understand the car industry and reach a reasonable decision,” an investment banking source told the Korean Investors.

By Chang Min Jang, Chang Jae Yoo and Ikhwan Kim

cmjang@hankyung.com