About Face
U.S. hedge fund Elliott Management has sold its shares in Samsung C&T, the South Korean construction company, after Elliott failed to stop an US$8 billion merger with another Samsung affiliate, Cheil Industries.
An Elliott spokesperson said on Aug. 6 that it will exercise its right to sell back shares to Samsung C&T. It isn’t clear exactly how much Elliott is selling, but the option can be exercised only on shares held before the deal announcement.
Under South Korean law, Samsung C&T investors who object to the merger deal can sell shares back to the company by Thursday for 57,234 won, or $49.00, per share.
After the sale, Elliott will still retain a small stake in the merged company, giving it standing to continue pushing for shareholder-friendly measures. Elliott hinted that it would continue to fight for the rights of small shareholder rights on legal grounds.
Elliott’s efforts to block the merger of Samsung C&T and Cheil Industries exposed concerns about shareholder rights and familial succession in South Korea, where business is dominated by family-controlled conglomerates known as chaebols.
Elliott Associates said the deal grossly undervalued Samsung C&T and was unlawful as the Lee family tried to consolidate its control over Samsung Group companies. It used its 7.12 percent stake to block a restructuring, which would facilitate management succession to Lee Jae-yong, the son of the Samsung founder and chairman, Lee Kun-hee.
The hedge fund’s campaign against the merger hasn’t had any luck with Korea’s judiciary. Elliott lost two lawsuits in South Korea seeking to block the shareholder meeting. And in the end, 69.53 percent of the shareholders voted to back the merger.
Cheil Industries, on the other hand, announced that it would boost dividends and install an independent corporate governance committee if the deal was approved.