U.S. hedge fund steps up campaign against $8 billion Samsung asset shake-up

Thu Jun 18, 2015 5:56am EDT
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By Se Young Lee

SEOUL (Reuters) - U.S. hedge fund Elliott ramped up a campaign to block a proposed $8 billion merger of two Samsung Group firms on Thursday, laying out its case online a day before a court hearing on a deal seen key to a leadership succession in the family-run conglomerate.

Escalating what is already a rare case of shareholder activism in South Korea, the fund put online a 27-page paper detailing why shareholders in construction firm Samsung C&T Corp should reject the all-stock takeover offer from sister company Cheil Industries Inc.

Elliott has already said it believes Cheil's offer is too low, and its opposition could galvanize other investors. On Friday, a South Korean court will hear the fund's injunctions, which seek to block a July 17 C&T shareholder vote on the merger as well as C&T's attempt to sway the vote in the deal's favor by selling shares to ally KCC Corp.

"They are trying to show they have a strategy that could benefit not only Samsung C&T shareholders but also investors in other Samsung companies," said Kim Sang-jo, economics professor at Hansung University, referring to Elliott's online document.

The merger is critical for Samsung Group's restructuring, which is aimed at cementing a generational leadership succession

at South Korea's biggest and most influential chaebol. The deal would combine various stakes in the group held into a firm controlled by the children of founder family patriarch Lee Kun-hee, who remains hospitalized since a May 2014 heart attack.

Some institutional and local retail investors, also say the deal undervalues C&T and plan to vote against it in the July meeting.

Samsung Group needs the support of least two-thirds of the votes cast at the C&T shareholder meeting for the deal to proceed. In an apparent concession to Elliott, Samsung C&T said on Thursday its shareholders would vote on the fund's proposal to allow for non-cash dividends at the July 17 meeting.   Continued...

A man walks at the Samsung Electronics' headquarters in Seoul January 7, 2015.   REUTERS/Kim Hong-Ji