The likelihood of South Korea’s second-largest conglomerate Hyundai Motor Group’s proposed plan to reorganize ownership structure passing the shareholders meeting later this month has grown more uncertain as major U.S. proxy advisers as well as an activist fund mount pressure on the publicity front to topple the scheme.

The Institutional Shareholders Services (ISS) became the latest to join the chorus of opposition on Tuesday on the heels of Glass Lewis to advise shareholders to vote down the plan lacking a “compelling business justification” and “valuation that appears to be unfavorable for company shareholders,” echoing the same grounds of opposition from other proxy advisers and funds.

The plan placed to a vote in separate shareholders meeting on May 29 calls for Hyundai Mobis to spin off its module and after-sale services parts business to be merged with logistics firm Hyundai Glovis.

Shares of Hyundai Mobis finished Wednesday 0.63 percent lower at 237,000 won ($219.85) and those of Hyundai Glovis down 2.64 percent at 147,500 won.

Glass Lewis on Monday advised shareholders of Hyundai Mobis to oppose the company’s spin-off plan citing “questionable business logic” and “inadequate valuation.” The recommendation comes after U.S. activist fund Elliott Management Corp. said last week it will vote against Hyundai Motor Group’s restructuring plan as it “fails to offer terms that are fair to all shareholders” and urged more significant measures “to address the long unresolved issues… that have led to significant value discounts and underperformance.”

“The transaction presents an attractive opportunity for the controlling shareholder to lay the groundwork for resolving the circular ownership issues within the group and the related party concerns at Glovis, while retaining firm control over group companies," ISS said in a report.

Glass Lewis also said that the proposed arrangements are “profoundly unattractive for Mobis shareholders, yet more than reasonable for existing Glovis shareholders.”

Elliott Management and Korean proxy advisor Sustinvest made the same charges.

Elliott Management said last week that it will vote against the plan, saying that it “fails to provide a sound business rationale, fails to offer terms that are fair to all shareholders, fails to achieve any meaningful simplification of its corporate structure, fails to address significant valuation discounts, and fails to optimize balance sheets, improve shareholder returns or corporate governance.”

Hyundai Group so far has maintained a brave face and vowed to push ahead with the plan.

Hyundai Mobis has been requesting shareholders in a letter to vote for the spin-off and merger with Hyundai Glovis, a plan being promoted to increase transparency of the management structure by resolving cross-shareholding and reforming its business structure to more actively and efficiently deal with market and technological changes of the future vehicle industry.

In order for Hyundai Mobis’ proposed plan to go through, more than one-third of shareholders with voting rights must attend the meeting and more than two-thirds of them should vote for the plan. While Hyundai Motor Group’s friendly shares represent 30.1 percent, National Pension Service, the second-largest shareholder of Hyundai Mobis with 9.83 percent ownership, and foreign investors with about 48 percent in total, are considered decisive voters.

By Kim Jung-hwan and Lee Eun-joo

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