US hedge fund steps up campaign against $8 billon Samsung asset shake-up

Details why Samsung C&T Corp shareholders should reject the all-stock takeover offer from Cheil Industries

US 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 galvanise 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 favour 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, an economics professor at Hansung University, referring to Elliott's online document.

Some institutional and local retail investors 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.

The merger is part of Samsung Group's restructuring efforts which have accelerated since the company's 73-year-old patriarch Lee Kun-hee suffered a heart attack a year ago. The deal would combine various stakes in the group held by his heirs, paving the way for a smooth leadership transfer within South Korea's biggest and most influential chaebol.

In a statement, Elliott said it supported the conglomerate's restructuring needs but said the group should "properly recognize" Samsung C&T's value.

In a separate statement, C&T said it was committed to moving ahead with the merger to "maximise shareholder value". The company has hired Goldman Sachs and Credit Suisse as advisors on the deal, and its top executives have met investors to win support.