Samsung C&T merger with Cheil to go ahead despite staunch opposition

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.

On Friday, the NPS reached a still-to-be-disclosed decision on whether to vote its Samsung C&T Corp shares in favour of the proposed takeover from Cheil Industries Inc, without consulting the external committee.

Samsung C&T executives argue that the merger makes good business sense and will enhance shareholder value in the long run, and insist that the details of the all-stock deal are in full compliance with relevant laws and regulations.

South Korea’s Samsung has secured shareholder approval for the merger of two affiliates, seeing off an investor challenge led by a U.S. hedge fund. Both companies are subsidiaries of the Samsung Group, South Korea’s largest family-controlled conglomerate.

This particular takeover agreement, as well as consolidating the company, will give Lee Jae-Yong a significant stake in the wider conglomerate without the need for him to spend billions buying back shares from other investors.

Samsung Group’s 73-year-old patriarch, Lee Kun-hee, remains hospitalised following a heart attack previous year. South Korean stocks often trade at discounts to global peers due to opaque shareholding structures and low dividends.

Major Jewish human rights group the Simon Wiesenthal Center (SWC) told South Korean conglomerate Samsung that the removal of antisemitic cartoons published on its website was insufficient, and demanded an explanation as to why the cartoons were posted in the first place.

Investors and analysts expect Elliott to continue challenging Samsung with lawsuits.

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.

The Samsung-Elliott fight was rare in a country where institutional and retail investors seldom oppose company plans that are put forth at shareholders meetings. “This merger must not be approved as around 7 to 8 trillion won of our assets will be handed over to Cheil Industries without any compensation”. The offer values C&T at $9.5 billion, based on Cheil’s price at midday local time (0400 GMT). 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.

– Turnout at the shareholder meeting was high, at more than 84 per cent. Two third of all votes cast were needed to approve the deal.

“While the deal will boost Samsung’s restructuring, Samsung lost the faith of a lot of foreign and minority shareholders”, said Kang Dong-oh, a proxy representative for an online forum of minority shareholders against the merger.

Soon after questioning the deal, Elliott CEO Paul Singer, found himself a victim of hate speech in the South Korean media.

Even a few investors that supported the deal have been critical of Samsung and Cheil, owner of the Everland theme park.