Shareholders at construction company Samsung C&T will vote Friday on the proposed takeover of it by another Samsung company, Cheil Industries.
The merger is strongly opposed by some of Samsung C&T’s shareholders, led by U.S. hedge fund Elliott Associates.
Lee family, which is controlling the Samsung conglomerate, has achieved a big victory over Elliot Associates LP when shareholders gave their approval for the $8 billion merger of two affiliates.
A bitter dispute over the proposed merger of two Samsung affiliates comes to a head on Friday with a shareholder vote that could – whatever the result – force a shift in corporate governance practice among South Korea’s giant, family-run conglomerates.
The vote is expected to be close, although investors appear to be betting the merger will succeed, sending shares in C&T and Cheil up 3.4 percent and 5.7 percent, respectively, on Thursday. Elliott had said that the takeover deliberately underestimated share price of the C&T, at an objectionable value to its shareholders.
The stand-off degenerated into a more personal battle between Singer and the Samsung founding family, after several cartoons allegedly depicting the American investor as a corporate extorsionist and making use of his Jewish background were posted on C&T’s website days ahead of the vote.
Samsung Group’s 73-year-old patriarch, Lee Kun-hee, remains hospitalised following a heart attack previous year.
Investors and analysts predict the Lees may now attempt to further consolidate control of Samsung Electronics by having it acquire IT services firm Samsung SDS, or even by splitting Samsung Electronics into an operating company and a holding company through which they can exert control. The National Pension Service, the single largest shareholder of Samsung C&T, also sent a statement expressing its intention to approve the merger. South Korean stocks often trade at discounts to global peers due to opaque shareholding structures and low dividends.
Friday’s meeting included jeers, people shouting “I strongly oppose the merger”, and a “parade of minority shareholders” opposing the deal, according to the Journal.
Goldman Sachs and Credit Suisse advised Samsung C&T and Morgan Stanley advised Cheil Industries.
Visitors look at Samsung products at a fair in Berlin.
Cheil Industries has said it wants C&T because the combined company would be more competitive in overlapping businesses – construction, fashion and trading.
Others resorted to nationalism, asking shareholders to protect the Korean company against a foreign investor.
In a proxy battle that has spread to South Korea’s courts and the front pages of its newspapers, Samsung has lined up almost a third of C&T voting shares – or more than three quarters of those held by investors who have publicly declared their intentions.
For Samsung it would be a major blow that could have a significant knock-on effect for its strategy of streamlining the group into fewer, larger companies.