US activist fund Elliott Management, which started an investor-state dispute (ISD) proceeding against the South Korean government, is seeking more than 700 billion won (US$670 million) in compensation for its alleged damage from the merger between Samsung C&T and Cheil Industries.
According to the notice of arbitration intent disclosed by the Ministry of Justice on May 11, Elliott claims, “The damage incurred is currently estimated to surpass US$670 million,” adding, “Besides that, interest, costs and other relief measures, which the arbitration court might deem appropriate, should be included in the compensation.”
The compensation demanded by Elliott is close to the highest among the various estimates predicted by experts in the stock industry and the international arbitration community. They had previously predicted Elliott would request a compensation between 200 billion won and 800 billion won (US$180 million and US$720 million) based on the estimated value of Samsung C&T shares owned by Elliott prior to and after the merger between Samsung C&T and Cheil Industries.
The hedge fund filed an ISD settlement against the South Korean government for the losses it suffered, allegedly claiming that South Korean government officials including former President Park Geun-hye made unlawful intervention in the merger. Elliott, which held 7.2 percent stake in Samsung C&T at the time of the merger in July of 2015, has been claiming that the merger ratio of 0.35 Cheil Industries share for one Samsung C&T share is not a fair calculation for the shareholders. The hedge fund also added that the actions taken by the National Pension Service of Korea are in breach of the U.S.-Korea free trade agreement.
The notice of arbitration intent was unveiled to the public in accordance with the terms of the Korea-US free trade agreement (FTA) which states that international arbitration proceedings must be disclosed for transparency. The Ministry of Justice, which handles the country’s litigation, is coming up with appropriate plans to deal with the situation in conjunction with other related government ministries including the Ministry of Strategy and Finance, Ministry of Foreign Affairs, Ministry of Trade, Industry and Energy and Ministry of Health and Welfare.