SEOUL (Reuters) - A South Korean court on Friday said it will rule by July 1 on U.S. hedge fund Elliott’s injunction request to block a Samsung C&T Corp 000830.KS shareholder vote on an $8 billion takeover bid from Cheil Industries Inc (028260.KS).
In an unusual example of shareholder activism in South Korea, the fund told the court Cheil’s all-stock offer was designed to pave the way for a leadership succession in the family-run Samsung conglomerate and did not serve the best interests of other shareholders.
“The company has yet to present a convincing argument on what synergies can come from the merger,” a lawyer for Elliott argued.
Investors and analysts say a Cheil-C&T merger would consolidate stakes in key firms like smartphone maker Samsung Electronics Co Ltd (005930.KS) into a company controlled by the founding Lee family heirs.
Cheil is Samsung Group’s de facto holding company.
Successional planning at South Korea’s biggest and most powerful family-run conglomerate has gathered momentum since patriarch Lee Kun-hee suffered a heart attack in May last year.
While the elder Lee remains hospitalized, heirs including his son and likely successor Jay Y. Lee have assumed greater responsibility and overseen a series of restructuring maneuvers setting the stage for a handover of power.
Lawyers for construction firm Samsung C&T argued the merger ratio met South Korean regulations and the U.S. fund - currently Samsung C&T’s third-largest shareholder - had no legal grounds to block the deal.
Elliott is also seeking an injunction against Samsung C&T’s sale of treasury shares to ally KCC Corp 002380.KS, something that C&T says will help defend itself and shareholders against the hedge fund’s attack.
The Seoul Central District Court said it would try to rule on both injunctions by July 1.
Yonsei University law professor Shin Hyun-yoon said Elliott’s case looked thin.
“The merger ratio currently proposed is in accordance with the rules ... and the board of directors have the right to decide how many treasury shares to sell at what price,” Shin said.
The shares were not sold at unreasonably low prices nor to a party that would act against C&T’s interests, he added.
Reporting by Se Young Lee and Sohee Kim; Editing by Miral Fahmy and Stephen Coates