Vote pits Samsung family against foreign, Korean investors

Lee is a major shareholder in Cheil Industries, which is the Samsung Group’s de facto holding company.

United States hedge fund Elliott Associates – which owns just over 7% of the firm – said the sale was too favourable to Cheil Industries and tried to block it in the South Korean courts.

For Samsung’s founding family, the move is a crucial step in consolidating control of the conglomerate.

South Korea’s Samsung has secured shareholder approval for the merger of two affiliates, seeing off an investor challenge led by a USA hedge fund.

Those 1% stakes give Elliott the right to sue on behalf of the companies, which Elliott could argue wasn’t acting in the best interest of its shareholders in backing the merger.

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. 005930, +3.81%, the crown jewel of the Samsung conglomerate, in the hands of heir apparent Lee Jae-yong, son of chairman Lee Kun-hee.

Analysts and investors have long expected that Mr. Lee would eventually seek to combine Samsung SDS with Samsung Electronics, which would further increase his stake in Samsung Electronics. Shareholders approved Friday a highly contested deal that strengthens the Samsung…

Hwang Sei-Woon, a researcher at the Korea Capital Market Institute in Seoul, said such disputes would become the norm unless South Korean chaebols worked to improve corporate transparency. That is less than 3 percentage points above the two-thirds majority needed to succeed.

July 7 – A Seoul court turns down Elliott’s request to stop a friendly shareholder of Samsung C&T from voting on the proposed merger. Of the votes cast, 69.53 per cent of C&T shareholders voted in favour. Goldman Sachs has also advised Wing Hang Bank and Bank of East Asia on their recent fights against Elliott.

Samsung C&T closed down around 10% Friday on the news.

Samsung’s 70 subsidiaries, engaged in businesses as varied as shipbuilding, home appliances, apartment buildings and mobile phones, generate revenue equaling a quarter of South Korea’s gross domestic product. While the combination of Samsung C&T and Cheil Industries effectively launched a holding company for the group, more changes need to be made to its ownership structure in the future, which will involve increasing control of Samsung Electronics.

“I am grateful for the shareholders who voted for the merger”, C&T chief executive Choi Chi-Hun told reporters. But with stockholders at the Samsung C&T meeting expressing their opposition to the merger, which they said was unfavorable to them, it took more than three and a half hours to deal with that single agenda item.

Publicly traded companies often remain under the control of close-knit family groups or state-backed shareholders, and legal protections for minority investors can be patchy.