By Kim Jae-won
The financial regulator said Friday that it has launched an investigation into nine Samsung group executives allegedly involved in illegal stock transactions using insider information.
A special investigation unit of the Financial Services Commission (FSC) is looking into the allegation that the executives, including a few CEOs of Samsung affiliates, earned illegal profits earlier this year with information that Samsung’s two key units will be merged. Samsung announced in May that it will merge its fashion unit Cheil Industries and construction affiliate Samsung C&T.
“We are probing an illegal stock trading case in which Samsung executives are suspected of being involved,” said Hwang Hyeon-il, an FSC director in charge of the matter.
He said the investigation began after a report from the nation’s bourse operator which found that the Samsung executives had bought large amounts of Cheil Industries shares in April and May. The authorities estimated the value of their combined purchases at 50 billion won ($43.2 million), suspecting the deals were made before the official merger announcement on May 25.
Shares of Cheil Industries had been on a steady rise to close at 188,000 won on May 26, when the merger plan was first announced. They had hovered between 130,000 won and 170,000 won for one month before the announcement.
The Samsung officials targeted Cheil Industries shares as they had already received information that the merger ratio of 0.35 Cheil Industries for 1 Samsung C&T share would be calculated from the former’s share price at the time, according to the authorities.
The merger ratio was the biggest issue raised by U.S. hedge fund Elliott which opposed the takeover, calling it was designed to hurt value of Samsung C&T shareholders. Elliott was the third-largest shareholder of Samsung C&T at the time, owning a 7.12 percent stake in the company.
Shareholders of the two companies approved the 8.9 trillion won deal in July. After the controversial merger, the new entity named Samsung C&T was officially launched on Sept. 1, with its shares listed on the stock market two weeks later.
Samsung said that it is too early to call it illegal trading of stock because the investigation is in its early stage.
“We are embarrassed to hear the news. We have found yet no evidence that the trades were unlawful so we will wait and see how the case unfolds,” said a manager from Samsung’s future strategy bureau, de facto control tower of the group.