February 16, 2019

NPS’ advisor opposes Hyundai’s spin-off merger deal

PUBLISHED : May 18, 2018 - 14:58

UPDATED : May 18, 2018 - 16:59

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[THE INVESTOR] Local proxy advisor Korea Corporate Governance Service on May 18 recommended shareholders to vote against the spin-off merger of Hyundai Motor's two affiliates, dealing a blow to the auto giant’s governance overhaul plan that will be put to vote on May 29. 

The KCGS, which advises National Pension Service and other institutional investors, opposed the deal, citing lack of improvement in shareholder and corporate value for Hyundai. “The merger doesn’t seem to answer the purpose (of restructuring) and the purported synergies from the deal are uncertain,” it said. 

The KCGS’ disapproval is in support of US activist fund Elliott Management that has been spearheading the opposition campaign against the auto conglomerate. Two influential proxy advisors ISS and Glass Lewis have also made similar recommendations. 

However, it is unclear whether the NPS -- which is thought to be the swing voter for the deal -- will follow the recommendations of outside advisory firms. In the past, the NPS approved a controversial merger deal between Samsung affiliates in 2015, when the KCGS and other proxy advisors opposed the plan. 

With a 9.82 percent stake, NPS is the second-largest shareholder of Hyundai Mobis, the auto parts making unit at the center of the Hyundai governance overhaul plan. Hyundai Motor Group Chairman Chung Mong-koo and affiliates hold a combined 30.17 percent stake in Mobis, less than foreign investors -- including Elliott -- who hold 48.6 percent combined. 

As the plan requires two-thirds consent out of one-third total shareholders with voting rights attending, Hyundai needs NPS’ votes in order to proceed with the deal. 

In March, Hyundai announced Mobis would spin off its lucrative module and after-service parts business, and merge with logistics unit Hyundai Glovis. The proposed deal is part of a restructuring program driven by Hyundai, following persistent calls from the government to improve complex ownership that gives too much power to the controlling Chung family.

By Ahn Sung-mi (

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