Inside Hyundai heir Chung Eui-sun’s plan to fend off Elliott attack

Bloomberg

With one of the most tenacious activist investors breathing down his neck, Hyundai Motor Group’s crown prince is preparing to defend his family’s dominance of the world’s fifth-largest automotive empire by seeking to win over shareholders ahead of a looming showdown.
After announcing about $1.5 billion in buybacks and stock cancellations in the past month, shareholder returns are “just beginning,” Vice Chairman Chung Eui-sun, the 47-year-old son of the group’s octogenarian patriarch, said in an interview at a Hyundai innovation centre event in Seoul. “Our shareholder policies unveiled so far are not everything we have.”
The founding family has much riding on the support of investors in the coming weeks. On May 29, they’re scheduled to vote on a reorganisation of the group, including a controversial $8.8 billion merger that could pave the way for Chung to ascend to the top. Problem is billionaire Paul Singer’s Elliott Management Corp., which bought more than $1 billion of shares in group units, has embarked on a campaign to derail the deal based on claims that it will shortchange minority shareholders.
Instead of management’s proposal — whereby parts-maker Hyundai Mobis Co. would spin off its biggest profit-generating businesses and merge them with a logistics affiliate — the US fund proposed that Mobis merge with flagship Hyundai Motor Co. to form a holding company that would oversee the conglomerate. It also proposed that group units return more than $11 billion in excess cash to shareholders, raise dividends, cancel treasury shares, add independent directors and improve governance.
Hyundai Mobis shares rose 2.4 percent, the most since April 4, to close at 237,000 won in Seoul. Chung said he wasn’t fazed by Elliott.
“That’s the way they do business,” Chung said. “We will listen carefully and if there are proposals that bring benefits to our company and other shareholders, we will review some of that.” Though Chung acknowledged that Mobis needs to do more to win over shareholders, he said his broader plan for the group centers on transforming Mobis from a simple parts maker to a cutting-edge, technology-centered automotive supplier that would challenge Germany’s Robert Bosch GmbH and lead the entire group in profits. That way, earnings would rise and returns for investors would increase, creating a “virtuous cycle,” he said.
“The best shareholder friendly policy is for us to make money, pay lots of dividends so that could boost the value of our company,” Chung said.
Developing software, artificial intelligence and robotics are also high on the priority list, he said. The company is looking at four to five possible acquisition targets as part of efforts to make Mobis grow, Chung said.
The Hyundai scion, who studied business at the University of San Francisco and at Korea University, has been making his mark at the automotive company since he was promoted from president of Kia Motors in 2009.