Proxy advisor Glass Lewis urges vote against Hyundai Mobis plan (updated)

Hyundai Glovis

15/05/2018 02:07

(Add Hyundai comments, details of the report, background)
    SEOUL, May 15 (Reuters) - U.S. proxy advisor Glass Lewis on
Monday recommended shareholders reject Hyundai Mobis Co Ltd's
 012330.KS  proposed spin-off merger plan, citing "questionable
business logic" and "inadequate valuation".
    The advisor's report, seen by Reuters, adds to the
challenges to the deal which analysts say lays the groundwork
for the succession of Hyundai Motor Group's heir apparent. Glass
Lewis is one of the largest proxy advisory firms that gives
voting recommendations to institutional investors. 
    Last week, U.S. activist fund Elliott Management, which owns
over 1.5 percent of the shares in Hyundai Mobis, said it will
vote against the deal, arguing the parts supplier is handing
over its lucrative business to an affiliate at a "depressed"
valuation.  urn:newsml:reuters.com:*:nL3N1SH7A4
    In March, Hyundai Mobis, a affiliate of Hyundai Motor Co
 005380.KS , announced its plan to spin off its domestic module
and after-service parts businesses and merge them with logistics
affiliate Hyundai Glovis Co Ltd  086280.KS , a plan which will
be put to a shareholder vote on May 29.
    After the merger, Hyundai Motor Group Chairman Chung
Mong-koo and his son, Vice-Chairman Chugn Eui-sun, will sell
their holdings in Glovis to buy stakes in Mobis, cementing the
family's grip on the de-facto controlling company.  
    It is part of a series of deals which Hyundai Motor Group,
South Korea's No.2 conglomerate after Samsung, said is aimed at
resolving its complex ownership structure following the
government's call to address its circular shareholdings.     
    Glass Lewis said the arrangements "clearly result in a
substantial value transfer in favor of Glovis' shareholders,
most notably including the family shareholders, who own roughly
30 percent of Glovis but only 7 percent of Mobis".
    The proposed terms of the spin-off merger are "profoundly
unattractive for Mobis shareholders, yet more than reasonable
for existing Glovis shareholders," Glass Lewis said.
    "Elliott has convincingly argued that the current Hyundai
Motor Group restructuring plan represents a sub-optimal
half-step toward resolving Hyundai Motor Group's circular
shareholding structure," the report said. 
    Also echoing Elliott's view, Glass Lewis said it believes
the spin-off merger shares many of the shortcomings in Samsung
Group's 2015 deal involving two of its affiliates. 
    In 2015, Elliott narrowly lost a battle to block the Samsung
deal, which later featured in a corruption scandal which led to
the jailing of the country's former president and bribery
charges against Samsung Group heir Jay Y. Lee, who denies any
wrongdoing. 
    Hyundai Motor Group responded that it would continue to
communicate the benefits of the plan with all stakeholders.
    "We believe our proposed restructuring plan is the optimal
solution to secure future competitiveness as well as resolve
regulatory issues for the entire group," it said in a statement.

 (Reporting by Hyunjoo Jin in Seoul and Liana Baker in NEW YORK;
Editing by Stephen Coates)
 ((hyunjoo.jin@thomsonreuters.com; 82-2-3704-5685; Reuters
Messaging: hyunjoo.jin.thomsonreuters.com@reuters.net))