Schindler Holdings AG, the second-largest shareholder of Hyundai Elevator, on Wednesday said the company will boycott the Korean lift-maker’s attempt to seek a paid-in capital increase, for the sake of shareholders’ interest.

Its stringent opposition is likely to ignite a heated debate at Hyundai’s annual shareholders meeting on Friday, where the company will seek approval to triple its total shares to 60 million.

“Schindler will vote against the proposal in order to best protect the company and the minority shareholders from unnecessary and abusive conduct by the management,” the company said in a press release. 

“Given the company’s current cash reserves as well as cash flow from operational activities, Schindler sees no reason for the amendments at this time,” the company stated. Hyundai, which reportedly has 115 billion won in cash reserves, said the additional money would be crucial for overseas expansion and facilitating cash flow.

Schindler slammed Hyundai’s proposal as an attempt to “continue using the company’s assets to protect management’s interests in the affiliates of the Hyundai Group,” and to “further dilute minority shareholders such as Schindler in an effort to silence them from checking the propriety of management’s decisions which have been guided by a personal agenda.”

Hyundai has raised capital four times in the past four years, raising 600 billion won. But this has inflicted damage to Schindler’s rights, the company claimed.

“Four years ago, Schindler held a 35.05 percent stake in the company, but due to the increased amount of stocks issued, the portion fell to 21.48 percent. This is a serious threat to investors,” said Rachael Kang, Schindler’s Korean representative. In order to succeed in its efforts, Schindler will likely have to fight against 40 percent shareholders who are loyal to the Korean company ― including Hyundai Group chairwoman Hyun Jeong-eun, Hyundai affiliates and others.

A Hyundai Elevator spokesman said the opposition was “expected” but declined to comment further.

The animosity between Hyundai and Schindler dates back to 2006, when the Swiss-based company first acquired some Hyundai shares. Rumors have been rampant that it was seeking a hostile takeover of the company.

The two companies are also engaged in a legal battle. Schindler sued Hyundai Elevator for inflicting financial damage by raising capital through another public offering, which was designed to make up the losses from derivative contracts to save its affiliate Hyundai Merchant Marine, when the marine arm’s stock price fell. The case will be heard next month.

Schindler insisted that Wednesday’s announcement was purely for investors’ rights, including those who agreed with Schindler.

“We have received many calls and questions regarding Schindler’s position on the issue of increasing the paid-in capital. While the company sought a response from the management about the process till 2013, we heard nothing back. So from last year, we decided to openly address our ideas,” Kang said.

By Bae Ji-sook (baejisook@heraldcorp.com)