Elliott Management sent two open letters last week to shareholders of Hyundai Motor and Hyundai Mobis to press the two companies to accept its request for a $6.3 billion dividend payout and the appointment of five outside directors it had recommended.
Flatly rejecting the proposals, Korea’s second-largest conglomerate is sticking to its original plan of paying less than $1 billion in dividends and appointing no new outside directors.
The two will have a proxy standoff during two separate shareholders’ meetings on March 22.
From the standpoint of Elliott, this is not its first fight with a big Korean company. In fact, the New York-based activist fund took on an even bigger player than Hyundai in Asia’s fourth-largest economy.
In 2015, Elliott was involved in a group-wide restructuring row with the Samsung Group, the country’s foremost chaebol.
Back then, Samsung was working on the merger of two affiliates _ Samsung C&T and Cheil Industries, which critics claimed was designed to beef up Vice Chairman Lee Jae-yong’s grip on the group.
Elliott, which held more than a 7 percent stake in Samsung C&T, was opposed to the amalgamation. Samsung won out and Elliott sold off its shares, seemingly suffering a major setback.
But the disputes were not done yet, as Elliott filed for an investor-state dispute (ISD) midway through last year, seeking $770 million in compensation from the Korean government.
Elliott argued that the government was a behind-the-scenes actor because the state-run National Pension Service, which had a major share in the Samsung entities, approved of the controversial merger.
“I think that a shareholder cannot take issue with an action of other shareholders. Hence, it would be difficult for Elliott to win the ISD case,” said Song Ki-ho, a renowned lawyer with expertise in global lawsuits and free trade issues.
“But nobody can say for sure who will eventually get the upper hand in any ISD battle. The Korean government may have to pay some compensation to Elliott.”
He does not expect a final ruling to be issued this year. “It will be next year at the earliest in consideration of previous cases,” he said.
And the second target of Elliott, which is under the helm of billionaire investor Paul Singer, is Hyundai.
Some news reports say that Elliott, which spent more than $1 billion to buy shares in Hyundai Motor and its affiliates, has suffered some $400 million in losses, hinting that its recent letters are a desperate maneuver to reduce this. Over the past year, Hyundai has seen its share price fall due to declining profits.
But a source familiar with the issue denied such reports.
“Excluding some insiders of Elliott, nobody knows the price of Hyundai shares when Elliott purchased them. Then how we can guess the gains and losses. This is nonsense,” said the source who asked not to be named.
“As far as I know, Elliott did not suffer losses in its Samsung investment in 2015 although it did not reach its target profit range. That’s what I heard from Elliott guys.”
Comments from Elliott were not available.
It remains to be seen how Elliott’s second action in Korea will end up. But lawyer Song predicted that it might end up in an ISD court.
“Paul Singer is a lawyer. ISD suits are always included in the options of the fund,” Song said.
The Elliott’s website says that Paul Singer holds a B.S. in Psychology from the University of Rochester and a J.D. from Harvard Law School.