On July 7, the Seoul Central District Court turned down the request of Elliott Associates to stop a friendly shareholder of Samsung C&T from voting on a proposed merger with another Samsung affiliate Cheil Industries.
The court ruled that Samsung C&T's sale of treasury shares to KCC Corp. is “not unfair” and doesn't go against social norms, which would allow the KCC to exercise its voting rights at a shareholder meeting scheduled on July 17.
The KCC bought a 5.76 percent stake in the Samsung Group’s trading and construction arm in June, which Elliott has claimed undermines C&T shareholders' interests, as it is based on unfair terms. The U.S.-based activist hedge fund is the third-largest shareholder of Samsung C&T with a 7.12 percent stake.
“The ruling reflects the court's position to block the indiscriminate lawsuits of the hedge fund by allowing shareholders to conduct a reasonable exercise of rights,” Samsung C&T said, adding, “The court ruling recognizes the legitimacy of the merger, which would help the company gain more shareholder support.”
Encountering the ruling, Elliott immediately showed its will for appeal by saying, “Noting the court's decision, we, however, maintain our firm position that the sale of treasury shares was designed solely to help a fundamentally unfair deal to Samsung C&T's shareholders and was also wholly improper from a corporate governance perspective.”
On July 1, the court rejected Elliot’s first injunction of the merger by saying that the proposed merger ratio of 0.35 shares of Cheil Industries for 1 share of Samsung C&T was made properly in accordance with the nation's financial regulations.
Samsung C&T and Elliott have been fighting to gain allies ahead of a shareholders' meeting scheduled on July 17.