The proposed $8 billion merger of two Samsung Group companies came under attack from two directions on Friday, as an activist hedge fund filed a court action against the deal and a shareholder advisory group recommended shareholders oppose it. In a rare case of shareholder activism in South Korea, hedge fund Elliott Associates escalated its battle to block the merger, filing an appeal against a South Korean court ruling in a fresh bid to block a key shareholder vote on the deal.
And advisory group Institutional Shareholder Services Inc (ISS) recommended Samsung C&T Corp investors vote against the all-stock takeover offer from sister firm Cheil Industries Inc.
The Cheil-Samsung C&T merger, some investors and analysts say, is key to consolidating various stakes in top affiliates of the sprawling family-run Samsung conglomerate ahead of a looming leadership succession. But ISS said the offer from Cheil, Samsung Group's de facto holding company, significantly undervalued Samsung C&T and that potential synergies from the merger touted by the two firms are not enough to compensate. This report, along with a recommendation from advisor Glass Lewis & Co a day earlier to reject the deal, could help Elliott line up more supporters in its quest to have the deal voted down at a July 17 Samsung C&T shareholder meeting.
"This will make it a harder fight for Samsung," said Park Ju-gun, head of research at CEO Score. Elliott, C&T's third-largest shareholder with a 7.1 per cent stake, has launched legal challenges and called on other investors to reject the deal. Cheil and Samsung C&T are also lobbying for investor support, promising improved shareholder returns and a better corporate governance structure for the post-merger company.
