Schindler-invested Hyundai Elevator faces S.Korean activism

South Korea’s Hyundai Elevator Co., the No. 2 shareholder of which is Schindler Holding AG, has faced a request from a local activist investor to take measures for long-term profitability and improve corporate governance, including by asking its board chair to step down.

KCGI Asset Management said on Wednesday that it sent an open letter to the board of directors of Hyundai Elevator, which acts as Hyundai Group’s holding company, calling for a restructuring of the board, better capital allocation policies and other improvement steps.

“We urge you to reassess Ms. Hyun Jeong-eun's role as an internal director and the chair of the board,” said the asset manager, formerly Meritz Asset Management acquired by Korea Corporate Governance Improvement Fund (KCGI), one of the country’s most aggressive shareholder activists.

KCGI Asset Management demanded the removal of Hyun from the board. The chairwoman of Hyundai Group is also the board chair of other affiliates such as Hyundai Movex Co. and Hyundai Asan Corp.

DOUBTS ARISE ABOUT ABILITY TO FOCUS ON BOARD

The asset manager with a stake of more than 2% in Hyundai Elevator said the Supreme Court of Korea ordered Hyun to compensate 170 billion won ($127.2 million) to the country’s top elevator maker for violations of duty of care and conflict of interest issues.

KCGI Asset Management also said she is subject to further legal action due to issues such as the asset transfer to Hyundai Movex, Hyundai Elevator’s logistics system and information technology affiliate.

“In these circumstances, we doubt her ability to focus properly on the obligations as a board member,” it said in the letter.

The move, the asset manager’s first exercise of the stewardship code since acquired by KCGI, boosted expectations of a dispute over the management control of Hyundai Elevator and pushed up its share prices by 9.1% to 50,400 won, the highest since September 2021.

KCGI has been in the spotlight with various headline-making investments such as the purchase of a stake in Hanjin KAL Corp., the parent company of Korean Air Lines Co. The activist fund was also expected to buy more stakes in DB HiTek Co. to become the top shareholder in the South Korean foundry chipmaker.

HYUN IN TROUBLE

Hyun has already increased her stake in Hyundai Elevator to 8.2% as of end-June from 7.8% three months earlier, according to the company’s filing to a financial regulator. Hyun and friendly shareholders held a combined 27.8% stake, up from 26.6% as of the end-March.

The chairwoman has been struggling in the conflict with Schindler. She paid 280 billion won including a principal of 170 billion won to Hyundai Elevator after losing a nine-year-long legal battle against the company’s second-largest shareholder.

The Switzerland-based elevator manufacturer 2020 filed a separate derivative suit against Hyun.

KCGI Asset Management said it is willing to talk to Schindler.

“We look forward to discussing our recommendations with the board, Schindler Holding and major shareholders,” the asset manager said. “If constructive feedback is not received, KCGI Asset Management will undertake further stewardship activities.”

Schindler reduced its Hyundai Elevator stake to 13.9% earlier this month from 15.8% as of the end of the second quarter by selling shares in the local stock market.

In June, Hyun sought money from a South Korean private equity firm to defend the management rights of Hyundai Elevator from a potential hostile takeover from Schindler.

Write to Ji-Eun Ha at hazzys@hankyung.com
 

Jongwoo Cheon edited this article.