Samsung beats Elliott to pass merger deal
Employees walk past a Samsung C&T sign at the company’s headquarters in Seocho-gu, southern Seoul, Friday after the proposed merger with its affiliate Cheil Industries was approved at a shareholders’ meeting. / Yonhap
70 percent of shareholders cast yes ballots
By Kim Yoo-chul
Samsung C&T defeated U.S. hedge fund Elliott Associates to pass the proposed merger with its affiliate Cheil Industries at a shareholders’ meeting Friday.
Nearly 70 percent of Samsung C&T shareholders approved the merger, which is an essential element of the reorganization of Samsung Group under the control of company heir Lee Jae-yong.
Samsung said shareholders representing 84.73 percent of outstanding shares cast votes and 69.53 percent voted for the integration.
It will launch the merged entity, named Samsung C&T, on Sept. 1, with an aim to make it a global company with sales of 60 trillion won by 2020.
Jae-yong, vice chairman of Samsung Electronics, will emerge as the biggest shareholder of the merged entity with a 16.5 percent stake.
After the shareholders meeting at the aT center in Yangjae-dong, southern Seoul, Samsung C&T CEO Choi Chi-hun pledged to make a greater effort to boost shareholder value.
“This approval is huge for us. Samsung C&T won’t forget the support of retail investors and as a CEO, I promise that the company will improve shareholder value and their rights,” Choi said firmly, in a rather emotional tone.
Elliott Associates, headed by Paul Singer, expressed its disappointment with the result.
“Elliott is disappointed that the takeover appears to have been approved against the wishes of so many independent shareholders and reserves all options at its disposal,” it said in a statement.
Elliott declined to comment on its future plans.
Officials and analysts expect the hedge fund to take legal action to nullify the passage of the merger proposal.
“This fight will be long-running as Elliott Associates will prepare a series of legal counterattacks against Samsung C&T,” a Samsung executive said. “Samsung has no option but to take on Elliott.
Choi Young-ik, an attorney at a local law firm of Nexus representing the American hedge fund, said that Elliott doesn’t oppose Samsung’s ongoing move to transfer its management control to the third generation. He, however, said the swap ratio was “too much” for Cheil Industries, hurting value for Samsung C&T shareholders.
With the passage of the merger deal, 35 Cheil Industries shares will be exchanged with 100 Samsung C&T shares under a 0.35:1 swap ratio.
Meanwhile, the law firm questioned the legality of proxies provided by Samsung Electronics Chairman Lee Kun-hee, who owns 1.41 percent in Samsung C&T but has been hospitalized at Samsung Medical Center since last year due to heart problems.
“Elliott has questions about the validity of proxies of Chairman Lee. The chairman failed to appear due to health problems. If Lee provides proxies, then please clarify the timing. This is about whether or not Chairman Lee made clear his view on this issue,” the law firm said.
Samsung C&T CEO Choi refuted such claims and added that Lee voted for the plan via his legal representatives.
Some 500 Samsung C&T shareholders participated in the meeting and the atmosphere was intense.
Shareholders also voted against Elliott’s requests to revise the current rules governing the payout of dividends.
Samsung C&T and Cheil Industries pledged to pay greater attention to shareholders’ voices.
“We will listen more carefully to the voice of shareholders after the merger. We will also pay attention to the opinions of those who opposed, and expand communication,” they said in a joint statement.