S Korea court ruling keeps $8 billion Samsung merger bid on track

  • Reuters, Seoul
  • Updated: Jul 01, 2015 12:59 IST

A court on Wednesday rejected a US hedge fund's bid to block a shareholder vote on the planned $8 billion merger of two Samsung Group companies seen as a key step in the leadership succession at South Korea's biggest family-run conglomerate.

Elliott Associates, which owns 7.1% of construction firm Samsung C&T Corp, argues the proposed all-stock offer from Cheil Industries Inc, the Samsung Group's de facto holding company, undervalues C&T.

The deal would allow the heirs of patriarch Lee Kun-hee, who remains hospitalised since a May 2014 heart attack, to consolidate stakes in affiliates like smartphone maker Samsung Electronics Co Ltd and keep control of the group.

The Seoul central District Court's ruling against the US fund was widely expected, as most investors and analysts agreed the deal terms complied with South Korean regulations.

"The court's ruling validates the fairness of the merger ratio and affirms that legal requirements have been met," Samsung C&T said in a statement.

Even so, Elliott's aggressive intervention -- it only revealed its stake in C&T a month ago -- has shaken up the corporate scene in a country known more for the opacity of its family-run business empires than for shareholder activism.

The C&T shareholder vote is scheduled for July 17 and approval remains far from certain. Some investors including Aberdeen Asset Management, APG Asset Management and Ilsung Pharmaceutical Co have publicly spoken out against the deal.

Samsung Group needs the support of least two-thirds of the votes cast at the C&T shareholder meeting for the deal to proceed.

Elliott said in a statement it would continue to try to block the takeover. An Elliott spokesperson declined to comment on whether the fund would appeal to the ruling.

The court said it would rule before July 17 on a second injunction request from Elliott against C&T's attempt to sway the shareholder vote by selling shares to ally KCC Corp.

To secure support, Cheil on Tuesday promised bigger dividend payouts and potential share buy-backs from the post-merger company to boost shareholder value.

The firm also promised to establish a special committee to protect shareholder interests, while Samsung C&T sent out letters to investors asking them to vote in favour of the takeover.

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