Hyundai set for Elliott showdown as it rejects $6.3 billion payout call

[February 26, 2019]   By Hyunjoo Jin

SEOUL (Reuters) - Hyundai Motor Group on Tuesday rejected demands by U.S. activist investor Elliott Management for a combined 7 trillion won ($6.3 billion) dividend payout and new board members, complicating efforts to revamp South Korea's second-biggest conglomerate.

Opposition from Elliott led Hyundai to drop an earlier attempt to overhaul its ownership structure and executive vice-chairman Euisun Chung pledged in January to complete a restructuring expected to pave the way for him to succeed his father Mong-Koo Chung as group chairman.

"I think Elliott expected that its proposals would be rejected by Hyundai. Its purpose is to rally support from other shareholders for a vote on a restructuring plan," Park Ju-gun, head of corporate analysis firm CEO Score, said.

Elliott, which was not immediately available for comment, had proposed a 2018 dividend of 4.5 trillion won for Hyundai Motor and 2.5 trillion won for auto parts supplier Hyundai Mobis, regulatory filings show.

The two had proposed payouts of nearly 1 trillion won.

Hyundai will hold an annual shareholders meeting on March 22, when shareholders will vote on dividend and board members.

The group is expected to come up with a revised proposal, which is expected to be put to a vote at extraordinary shareholders meeting in April or May, Park said.

Hyundai Motor said in a regulatory filing that the dividend proposed by Elliott would lead to a "massive cash outflow," hurting future investments and shareholder value.

Chief Vice Chairman of Hyundai Motor Group Chung Eui-sun delivers his speech during the company's new year ceremony in Seoul, South Korea, January 2, 2019. REUTERS/Kim Hong-Ji/File Photo

Hyundai Mobis also said it would "undermine its future competitiveness" as it needs to invest more than 4 trillion won to develop new vehicles over the next three years.

Instead Hyundai Mobis announced a 2.6 trillion won shareholder return package over the next three years, less than Elliott's demand for at least 4 trillion won.

The Hyundai Mobis package includes dividends worth 1.1 trillion won, a buyback of stock worth 1 trillion won and a cancellation of 460 billion won worth of shares.

It said it will appoint former Opel Chief Executive Karl-Thomas Neumann, and Brian Jones, co-president at Archegos Capital Management, as outside board directors.

Hyundai Motor said it will also add foreigners as outside board directors, while appointing president Albert Biermann, a former BMW executive, as a new board member.

Hyundai Mobis and Hyundai Motor also announced plans on Tuesday to appoint Euisun Chung as co-CEO. Mong-Koo Chung will remain as co-CEO of the two companies.

(Reporting by Hyunjoo Jin; Editing by Christopher Cushing, Miyoung Kim, Muralikumar Anantharaman and Alexander Smith)

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