Samsung C&T ordered to increase stock purchase price

By Kim Jae-won

The Seoul High Court ordered Samsung C&T to increase its stock purchase price proposed to shareholders who opposed the construction company’s merger with Cheil Industries last year, court records showed Tuesday.

The appeals court said that Samsung C&T should hike the share price from 57,234 won to 66,602 won, saying the initial price failed to reflect the real value of the stock. The court overturned a lower court’s ruling in January that declined to accept the plaintiffs’ claim that the price was too low.

“The stock purchase price suggested by Samsung C&T during the merger process was too low,” said the appeals court in its ruling. “The market price of Samsung C&T stock failed to reflect the real value of the company.”

Minority shareholders and Ilsung Pharmaceuticals, a local drug maker that held a 2.11 percent stake in Samsung C&T, filed a suit last year seeking an adjustment to the purchase price.

The court also suspected that the company posted a poor performance intentionally, seeking to help its owner family merge the company with its affiliate Cheil at a low price. Cheil was a fashion affiliate of Samsung Group.

“It is inappropriate to calculate the stock purchase price based on the market price, considering the family of Samsung Group Chairman Lee Kun-hee could benefit from the merger when the stock price of Samsung C&T was low, while that of Cheil Industries was high,” according to the ruling.

The appeals court also pointed out that Samsung C&T was reluctant to build new apartments and transferred its own orders to other affiliates before the merger announcement, raising suspicions somebody intentionally damaged its performance to help its owner family.

Samsung C&T said it would appeal the ruling, denying allegations that the company manipulated its stock price to help the Lee family. The legal representative of the plaintiffs also said they will appeal, saying the price proposed by the court is still too low.

Last year, Samsung Group completed the merger between Samsung C&T and Cheil Industries, overcoming opposition from U.S. hedge fund Elliott, a key shareholder of Samsung C&T, which opposed the deal saying it hurt shareholders’ value. The American hedge fund raised issues of Samsung’s corporate governance, arguing the group should respect shareholders’ rights.

Elliott also filed a similar suit last year but dropped the case in March after reaching an agreement with Samsung C&T. Further details were not disclosed.