Samsung C&T moves against shareholder activism
A sign is seen in front of Samsung C&T's building in Seoul in this 2022 file photo. Newsis
Samsung C&T spoke out against shareholder activism by City of London Investment and other hedge funds, Thursday, after their proposals of a share buyback and increased dividends were added to the agenda for the regular general meeting of shareholders scheduled for March 15.
The company asked its shareholders to vote against the activist funds, emphasizing that their proposals weigh heavily on its management. The activist funds urged Samsung C&T earlier this month to allocate 500 billion won ($375 million) to a share repurchase program. They also requested a 4,500 won dividend per common share and a 4,550 won dividend per preferred share.
“The proposed size of shareholder returns reaches 1.2 trillion won, which exceeds 100 percent of our company’s free cash flow between 2023 and 2024. The outflow of such a large amount of cash will prevent us from securing future growth engines and money to enhance competitiveness,” said the construction, trading and resort firm, which is considered Samsung’s de facto holding company.
Since a growing number of activist funds began to ask Samsung C&T's board last year to enhance shareholder value, this is the first time for the company to criticize their suggestions. Samsung C&T had maintained a cautious stance until recently, saying that its board members would review the proposals after finalizing the 2023 business performance.
The group of activist funds that made shareholder proposals hold a combined 1.46 percent stake in Samsung C&T. Palliser Capital, which owns a 0.62 percent stake, did not join the group, despite the British asset manager’s recent request for Samsung C&T to turn its complex group structure into a holding company structure so as to reduce group-wide inefficiencies.
Domestic securities analysts expect Samsung C&T to defeat the activist funds in the upcoming meeting of shareholders. There is speculation that foreign fund managers made impracticable proposals to enjoy short-term margins through a stock price hike.
However, some minority shareholders support the activist funds, asking other shareholders to entrust the funds with a vote. Law firm Kim Chang Lee also represents the activist funds.
In order to win over shareholders, Samsung C&T said Wednesday that its board members agreed to retire nearly 1 trillion won worth of treasury stocks. In February 2023, the company announced its plan to retire all its treasury stocks by 2026.