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| Employees of the National Pension Service are seen in the lobby of the company headquarters in southern Seoul, Friday. / Yonhap |
By Choi Kyong-ae
The National Pension Service (NPS) made a decision Friday on whether it will vote for the merger between Samsung C&T and Cheil Industries at a shareholders' meeting, July 17.
However, the state pension fund, the largest single shareholder of Samsung C&T, fell short of revealing details of its decision.
"We have made a decision but we cannot make it public until the shareholders meeting is over," an NPS spokeswoman said without elaborating.
The state fund has compelling reasons to support the planned merger despite U.S. hedge fund Elliott Associate's campaign to overturn the move, a member of the fund's nine outside advisors said before the decision was made.
"The NPS has to cast a vote to pass the merger. If the merger collapses, major companies that represent Korea may fall prey to vulture funds and may not make investments as they will focus on protecting their management rights," said Oh Jeong-geun, a professor of the Department of Finance at the Graduate School of Information and Telecommunications at Konkuk University.
He made the remarks during an interview with Yonhap News Agency. He said a lack of investment may result in a depression in Asia's fourth-biggest economy.
The merger swap ratio of 1 share of Cheil Industries to 0.35 of a share of C&T is acceptable given that Cheil has leisure, fashion and biotechnology businesses that have growth opportunities, but C&T's construction business looks murky, Oh said.
NPS has a stake of 11.61 percent in Samsung C&T and holds a casting vote. Elliott is the third largest with a 7.12 percent stake.
Meanwhile, Samsung C&T reiterated it will continue to drum up support from C&T shareholders in the days leading up to July 17 by explaining the benefits and opportunities which will arise from the merger.
As part of joint efforts to strengthen shareholder value after the merger, Samsung C&T and Cheil will form a six-member Governance Committee, including three outside experts, and regularly meet shareholders to brief them on performance and plans, and seek opinions, Samsung C&T said in a statement, Friday.
"The merged entity will spend up to 0.5 percent of its operating profit for social contribution activities," a Samsung C&T spokesman said. Samsung C&T earned 652.36 billion won in operating profit for the whole of 2014.
After a Seoul court rejected Elliott's two injunction requests against Cheil's "unfair takeover proposal," the U.S. fund has urged Samsung C&T shareholders to vote against it as the move is not in the best interest of the shareholders.
Elliott said Wednesday Cheil is not an obvious good merger partner and the benefits of such a merger are highly questionable. It added that Samsung C&T's case for the merger with "blue-sky" forecasts for revenue, profitability growth and claimed synergy are speculative and unsupportive.
"We expect that the NPS -- entrusted with the hard-earned capital of ordinary Koreans -- will choose to make the proper financial decision to oppose these wholly unfair takeover proposals," Elliott said in a statement released Friday.
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