The fund, Elliott, is opposing a takeover deal between Samsung companies that critics say will ensure Samsung’s founding family retains outsized influence over the conglomerate.
The bittersweet victory comes as an enormous relief to the South Korean conglomerate run by the country’s wealthiest family, as it seeks to restructure the multi-headed corporation ahead of a generational transfer of power from ailing patriarch Lee Kun-Hee.
Spearheading opposition to the merger is the USA hedge fund Elliott Associates, which is the third-largest shareholder in C&T and has unsuccessfully moved the courts to block the deal on the grounds that it undervalues the construction firm.
The New York hedge fund Elliott Associates wanted to scuttle the deal, saying it grossly undervalued Samsung C&T and represented an unlawful attempt by the Lee family to consolidate its hold. So there is now widespread speculation in the marketplace that a merger between Samsung SDS and Samsung Electronics could be next, enabling Lee to further tighten his control over Samsung Electronics.
Reuters, citing a source, reported that 11.2% shareholder National Pension Service voted in favor of the transaction on Friday.
The battle centered on the $8 billion merger of two Samsung affiliates, Samsung C&T and Cheil Industries.
Cheil Industries received support to take over Samsung C&T from 69.53% of those voting. This has sparked criticism over the South Korean legislation not offering enough protection for minor shareholders and foreign investors in such cases.
A shareholder of Samsung C&T Corp. enters to the venue for a general meeting in Seoul, South Korea, Friday, July 17, 2015.
He remains an important shareholder in the newly merged entity, and he did inspire other shareholders to speak out against management. Others questioned how Samsung C&T-which built Dubai’s Burj Khalifa-could benefit by joining forces with Cheil, an operator of amusement parks and fashion businesses. He also said that the reputation of Samsung will take a hit at least temporarily.
While the nod of approval for the merger clears the way for a simplification of Samsung’s Byzantine ownership structure it is also being viewed as another defeat of good corporate governance at the hands of the chaebols that dominate the commanding heights of South Korea’s economy. “By combining the business competencies of the two companies, we will maximize synergy and increase our value to meet your expectations”, said Choi Chi-hun and Kim Shin, co-CEOs of Samsung C&T, and Yoon Ju-hwa and Kim Bong-young, CEOs of Cheil Industries in a joint statement released on Friday.
The NPS made its decision without consulting an external committee that it sometimes calls upon for hard votes – and which often votes against company management.