June 11, 2015 / 1:39 AM / 4 years ago

Hedge fund, Samsung Group locked in fight over $8 billion merger

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

SEOUL (Reuters) - U.S. activist hedge fund Elliott filed another injunction to block a proposed $8 billion merger of two key Samsung Group companies, escalating a conflict over a deal seen key to leadership transfer at South Korea’s top conglomerate.

Elliott said it had filed its second injunction with a South Korean court, this time to stop builder Samsung C&T Corp from selling treasury shares amounting to a 5.8 percent stake to KCC Corp in a bid to gain KCC’s support for the proposed all-share takeover offer from Cheil Industries Inc.

In a statement, Samsung C&T said the sale would defend shareholders against “an attack from a foreign hedge fund intended for a short-term trading profit”.

Both Samsung C&T and Cheil are Samsung Group affiliates and the merger would allow the conglomerate’s controlling Lee family to consolidate its holdings and pave the way for an eventual power transfer since patriarch Lee Kun-hee, 73, fell ill a year ago. He remains hospitalized.

The U.S. fund, which last week emerged as the third largest shareholder in the construction firm, believes the merger undervalues Samsung C&T and is already challenging the deal in court.

Such investor activism is rare in South Korea and could galvanize more opposition to the deal from smaller shareholders, analysts say. Several other big investors have also criticized Cheil’s proposal as a low-ball offer.

“Elliott has nothing to lose and this is do-or-die for Samsung... so Samsung needs to offer proper valuations for the deal,” said Park Ju-gun, head of corporate analysis firm CEO Score.

KCC told Reuters they were checking the details of Elliott’s injunction request and declined to comment further.

Samsung C&T shares were down 5.7 percent as of 2203 ET, underperforming a 0.5 percent rise for the broader market.

Reporting by Se Young Lee; additional reporting by Sohee Kim; Editing by Miral Fahmy

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