By Hyunjoo Jin and Liana B. Baker
SEOUL/NEW YORK (Reuters) - A unit of activist hedge fund Elliott Management said on Wednesday that it holds more than $1 billion of shares in three key affiliates of South Korea's Hyundai Motor Group, and said more needs to be done to reform the company.
In its latest challenge to South Korea's family-run conglomerates, Elliott Advisors called for "a more detailed roadmap as to how it will improve corporate governance, optimize balance sheets, and enhance capital returns at each of the companies" including Hyundai Mobis <012330.KS>, Hyundai Motor <005380.KS> and Kia Motors <000270.KS>.
South Korea’s auto-to-steel giant Hyundai Motor Group announced a plan last week to streamline its complex ownership structure as it responds to calls from the government and investors to reform the country’s powerful family-controlled conglomerates or chaebols.
The plan will be put to shareholders for approval on May 29, but worries that a proposed restructuring plan would benefit the parent group’s controlling family ahead of company’s shareholders hit shares.
While Elliott said it was pleased that Hyundai Motor Group has taken a first step toward improving its corporate structure, it said in a statement that "more needs to be done to benefit the companies and stakeholders."
Under Hyundai's plan, parts supplier Hyundai Mobis is to spin off its domestic module and after-service parts businesses and merge them with logistics affiliate Hyundai Glovis <086280.KS> backed by Hyundai's family members.
But some investors and analysts said Mobis could be giving away cheaply what is seen as the more profitable part of its business.
After the merger, parent Hyundai Motor Group’s Chairman Chung Mong-koo and his son Chung Eui-sun, who is vice chairman, will buy stakes in Mobis held by other affiliates Kia Motors, Glovis and Hyundai Steel <004020.KS>.
"Elliott looks forward to engaging with management and other stakeholders directly on these issues, and to offering recommendations regarding the proposed plan," it said.
A Hyundai Motor spokesman in Seoul was not immediately available for comment outside business hours.
Last year, South Korea’s new antitrust chief told Reuters that he has been in talks with Hyundai Motor Group about unwinding its circular shareholdings, which critics say gives too much power to its controlling family at the expense of shareholders.
His commission welcomed Hyundai's latest decision.
Elliott's call adds to challenges for Hyundai, which is struggling from slowing sales in China and the United States, due to its delayed response to the sport utility vehicle segment, and Seoul’s diplomatic row with Beijing last year.
BATTLE WITH CHAEBOLS
Paul Singer’s $33 billion firm Elliott Management has taken on Samsung Group, South Korea's biggest family-run conglomerate, as well as the Li family, which founded Hong Kong’s third-largest lender Bank of East Asia.
In 2015, Elliott narrowly lost its battle to block a merger of two Samsung Group affiliates that would allow the controlling Samsung family to consolidate their holdings ahead of a leadership transition.
Like Samsung, Hyundai has a large foreign investors base.
In 2016, Elliott called on Samsung Electronics <005930.KS> to introduce a transparent holding company structure and pay a 30 trillion won special dividend, among other demands. In 2017, Samsung rejected the call for a holding company, but announced plans to cancel its existing treasury shares worth over $35 billion by 2018.
Founded by Singer in 1977, Elliott is renowned for winning cases against Peru and Argentina for repayment of debts they took on at a deep discount during their financial crises.
While U.S. hedge funds used to rarely target Asia-based companies for activist campaigns, it is now becoming more popular. San Francisco-based activist hedge fund ValueAct Capital said late last month it was considering making its first investment in Japan.
(Reporting by Hyunjoo Jin in Seoul and Liana B. Baker in New York; Editing by Adrian Croft and Tom Brown)