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American Hedge Fund Elliot Files Injunction against Samsung C&T Merger
Interference
American Hedge Fund Elliot Files Injunction against Samsung C&T Merger
  • By Cho Jin-young
  • June 10, 2015, 02:30
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The Seoul High Court ruled on May 31 that the stock price of Samsung C&T had failed to reflect the value of the corporation in an objective way.
The Seoul High Court ruled on May 31 that the stock price of Samsung C&T had failed to reflect the value of the corporation in an objective way.

 

The American hedge fund Elliott Management filed a court injunction to stop the merger between Samsung C&T and Cheil Industries Co. Some say that the company is trying to maufacture conflict over the leadership in Samsung Group rather than just go after short-term profit-making.

According to Samsung and industry sources on June 9, Elliott Management filed the injunction against Samsung C&T and its directors with the Seoul Central District Court. The company has taken the step of commencing legal proceedings for an injunction seeking to prevent the proposed takeover from going ahead at the shareholders meeting slated for July 17. Elliott insisted that the injunction is a measure to protect the interests of Samsung C&T's shareholders, saying, “The proposed takeover is clearly neither fair to nor in the best interests of Samsung C&T's shareholders, and that it is unlawful.”

Previously, Elliott sent an official document to foreign stockholders and Samsung Group’s subsidiaries against the merger, gathering allies. It also went further by taking legal action. Elliott has acquired a 7.12 percent stake in Samsung C&T, but cannot secure an additional stake by the deadline of the stockholder’s list, which is June 11 according to the regulations on capital market laws for investors who possess more than a 5 percent stake.

Some industry watchers said that Elliot can file an investor-state dispute (ISD) and file a lawsuit against the court in the U.S. in the future if the injunction is not accepted in the local court.

Some also said the main intention of Elliott to take legal action against the merger appears to cause conflicts over the management of Samsung Group, rather than just short-term profit-taking. When there are conflicts in the management rights of Samsung Electronics, the stock price of Samsung Electronics will increase, and Samsung C&T, which holds a 4.1 percent share of Samsung Electronics, will strengthen its status. Accordingly, Elliot, the third largest stockholder of Samsung C&T, can strengthen its position in the group.

Samsung expects that the merger will not fail or no appraisal rights of dissenting shareholders at the stockholders meeting scheduled on July 17 as long as their equity structure maintains at the current level. However, the company keeps an alert state while operating the merger task force team, which is led by Samsung C&T CEO Choi Chi-hun and Cheil Industries CEO Yoon Joo-hwa.

On the same day, the stock prices of the Samsung Group showed a weakness. Samsung Electronics and Samsung SDS saw a 2 percent decrease, while Samsung C&T saw a 4 percent decrease. It was also same with Cheil Industries. An analyst from a stock firm said, “As there were rumors that even major domestic institutional investors will not take sides with Samsung C&T after Elliot files a lawsuit, stockholders appeared to sell related stocks. Since some say that the merger between Samsung C&T and Cheil Industries will not be easy, uncertainties of related stocks are standing out.”