Hyundai Motor Group decided to back away from its restructuring plan following a growing rally of opposition led by U.S. activist hedge fund Elliott Management.

Hyundai Mobis Co. on Monday called off the shareholder meeting scheduled for May 29, which was to put to a vote a plan to spin off its module and after-sales service businesses and merge them with logistics firm Hyundai Glovis Co.

Lim Young-deuk, chief executive of Hyundai Mobis, said in a statement the company recognized the “lack of communication with shareholders and the market” and decided to review the overhaul scheme and seek approval at a later date after gaining sufficient confidence and support from the market.

The decision represents a major setback to the father-to-son succession at Korea’s second-largest conglomerate. While the auto group had announced the reorganization plan as a means to streamline its ownership structure, critics had viewed it more as a move to ease the transfer of power from 80-year-old Chairman Chung Mong-koo to his son, Vice Chairman Chung Eui-sun.

Elliott had ramped up pressure against Hyundai’s scheme since revealing it owned over $1 billion worth of shares in Hyundai Motor, Kia Motors and Hyundai Mobis. It especially raised questions to the 0.61:1 merger ratio between Hyundai Mobis and Hyundai Glovis, saying it undervalued Mobis shares and was unfair to its shareholders.

Elliott’s argument gained weight when proxy advisers including Institutional Shareholders Services and Glass Lewis showed their support and released statements advising shareholders to vote down on the plan.

The vote faced further uncertainty when Korea Corporate Governance Service, a proxy adviser under the National Pension Service, which holds a decisive 9.8 percent share in Hyundai Mobis, also voiced its opposition.

Meanwhile, analysts forecast that the group would try to proceed with the restructuring plan by having Hyundai Glovis sell its complete knock down business and buy 16.9 percent of Hyundai Mobis shares currently owned by Kia Motors. Hyundai Mobis is projected to seek ways to boost its shares and shareholder profits through investments in future mobility technologies.

By Kim Jung-hwan and Kim Hyo-jin

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