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Activist fund Elliott takes hit and exits Hyundai Motor

Divestment of South Korean automaker cost $430m: local media

In response to Elliott's demand, Hyundai Motor increased spending on research and development activities and mergers and acquisitions.    © Reuters

SEOUL -- Activist investor Elliott Management has sold all its shareholdings in South Korea's Hyundai Motor Group, local media outlets reported Thursday.

The U.S. activist hedge fund bought 3% in Hyundai Motor in early 2018 and small stakes in the company's subsidiaries Kia Motors and auto parts maker Hyundai Mobis. It had since pressured the group to increase dividend payouts, buy back shares and spend more to grow.

Elliott is believed to have bought Hyundai Motor shares at about 160,000 won ($137) each. The company's share price subsequently fell below 100,000 won apiece but have recovered to trade between 120,000 won and 130,000 won each recently.

Quoting a local security industry insider, The Korea Economic Daily said the exit left Elliott with losses totaling 500 billion won ($430 million).

Hyundai Motor on Wednesday reported that its operating profit for the year ended December soared more than 50%, despite a slight sales drop as the automaker benefited from improved profitability and the popularity of its sport utility vehicle models. The reason behind Elliott's decision to sell the shares at this time is not clear.

Hyundai Motor had complied with some of Elliott's demands. A significant dividend increase proposed by Elliott was voted down at the March 2019 general shareholders' meeting, but Hyundai Motor bought back shares worth some 250 billion won.

The company also agreed to increase growth spending in areas of research and development, and mergers and acquisitions. In 2019, Hyundai increased the total budget allocations to such spending by 30% from a year ago.

It also announced plans to tie up with a U.S. self-driving technology company and players in nonauto industries, including a major ride-hailing company.

Hyundai Motor started to reform its management structure, which had the typical characteristics of South Korea's family-run conglomerates, including complex, interlocking ownership relationships between group companies.

In around 2017, Chung Eui-sun, executive vice chairman of the entire conglomerate and a founding family member, started to untangle those relationships. However, Elliott, which owned stakes in the three core group companies, opposed this, along with a number of institutional investors, forcing the restructure to be stopped in May 2018.

Elliott's withdrawal may prompt the group to restart a similar attempt to reform the ownership structure.

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