Samsung’s Cheil, pitching US$8b merger, pledges higher returns

SEOUL, June 30 (Korea Bizwire) – Cheil Industries, the de facto holding company of Samsung Group, pledged Tuesday to deliver more dividends to shareholders and revamp its overall governance structure, as it seeks to convince investors ahead of a key shareholders meeting for a proposed merger with the group’s construction arm.

Last Friday, Elliott Associates dialed up pressure on the Samsung Group’s Lee family and said the due diligence done on the C&T merger was poor and C&T’s management did not set aside enough time to study the merger proposal properly. Rumors and speculation were ripe in the markets about what was behind the low level of C&T stock prices.

In a rare case of shareholder activism in a country that has always been wary of foreign investors, Elliott has repeatedly criticised the deal as unfair to Samsung C&T shareholders and called on investors to vote against Cheil’s offer. It sold 57.6% stake in Samsung SDI Chemical, and 32.4% stake in Samsung Techwin, to the Korean Hanwha Group. That makes Lee Jae-yong, the Samsung chairman’s son, the largest shareholder in the combined entity, putting the C&T-owned 4.1 percent stake at Samsung Electronics under his control. And Samsung Bioepis is angling to play a lead role in the new era, looking raise about $1.3 billion, via IPO or otherwise, to develop knockoffs of the next wave of biologics coming off patent, the company told Reuters.

The judges said there were no grounds to believe that the stock prices of C&T were unlawfully manipulated.

The Seoul Central District Court said on Wednesday that the merger ratio which was argued by the USA hedge fund as problematic can not be seen as unjust since the merger deal is in accordance with current law.

“We note that the Court has not yet decided whether the wholly inappropriate sale of treasury shares by Samsung C&T to KCC in blatant support of the Proposed Merger is, as Elliott believes, unlawful”.

Samsung announced the deal in May, saying it was necessary for the future of the two companies. His father Lee Kun Hee was hospitalized past year.

Recent health problems concerning the senior Lee, now bedridden after suffering a heart attack past year, prompted the group to step up restructuring efforts.

After Elliott beefed up its fight to thwart the deal and other shareholders spoke up against the merger plan, Cheil and Samsung C&T have promised a better treatment of shareholders such as increased dividend payouts and creating a governance committee.

Samsung C&T welcomed the rulings and vowed to push through with the merger, calling it a “lawful” move that was in the interests of both companies’ shareholders.