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Hyundai rejects Elliott's payout call, shares rise ahead of showdown meeting

By Hyunjoo Jin

SEOUL (Reuters) - Hyundai Motor Group on Tuesday rejected demands by U.S. activist investor Elliott Management for a combined 7 trillion won (£4.75 billion) dividend payout and new board members, complicating efforts to revamp South Korea's second-biggest conglomerate.

Opposition from Elliott led Hyundai to drop an attempt to overhaul its ownership structure last year, and Executive Vice-Chairman Euisun Chung pledged in January to complete a restructuring expected to pave the way for him to succeed his father Mong-Koo Chung as group chairman.

Elliott, which was not immediately available for comment, had proposed a 2018 dividend of 4.5 trillion won for Hyundai Motor and 2.5 trillion won for auto parts supplier Hyundai Mobis, according to regulatory filings and sources.

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This is well over the companies' proposed payouts of nearly 1 trillion won.

Hyundai Motor and Hyundai Mobis will hold separate annual shareholders' meetings on March 22, when shareholders have a chance to vote on the respective proposals made by the companies and Elliott.

Hyundai Motor and Hyundai Mobis shares gained more than 4 percent on Wednesday as investors licked their lips at the prospect of higher returns and a favourable restructuring plan due to Elliott's pressure.

"We expect a vote showdown at the upcoming meeting, which will create a favourable environment for minority shareholders," Chung Yong-jin, an analyst at Shinhan Investment and Securities said.

Hyundai Motor Group is expected to come up with a revised restructuring plan, which is expected to be put to a vote at an extraordinary shareholders' meeting in April or May, experts said.

"Elliott's purpose is to eventually rally support from other shareholders for a vote on a restructuring plan," Park Ju-gun, head of corporate analysis firm CEO Score, said.

Hyundai Motor said in a regulatory filing that the dividend proposed by Elliott would lead to a "massive cash outflow," hurting future investments and shareholder value.

Hyundai Mobis also said it would "undermine its future competitiveness" as it needs to invest more than 4 trillion won to develop new vehicles over the next three years.

Instead Hyundai Mobis announced a 2.6 trillion won shareholder return package over the next three years, less than Elliott's demand for at least 4 trillion won.

The Hyundai Mobis package includes dividends worth 1.1 trillion won, a buyback of stock worth 1 trillion won and a cancellation of 460 billion won worth of shares.

It said it will appoint former Opel Chief Executive Karl-Thomas Neumann, and Brian Jones, co-president at Archegos Capital Management, as outside board directors.

Hyundai Motor said it will also add foreigners as outside board directors, while appointing president Albert Biermann, a former BMW executive, as a new board member.

Hyundai Mobis and Hyundai Motor also announced plans on Tuesday to appoint Euisun Chung as co-CEO. Mong-Koo Chung will remain as co-CEO of the two companies.

(Reporting by Hyunjoo Jin; Additional reporting by Heekyong Yang; Editing by David Evans and Stephen Coates)