Samsung C&T seeks to court NPS
By Kim Jae-won
The National Pension Service (NPS) is drawing attention from investors for its stance over the planned merger between two key Samsung Group affiliates as tensions between the group and U.S. hedge fund Elliott are intensifying, analysts said Tuesday.
The state pension fund holds the key in the proposed merger of Cheil Industries and Samsung C&T because the fund owns a 9.79 percent stake in the construction and trade company.
The NPS said that it will decide on the matter after analyzing the case.
“We will have time to think about the issue. We will make a decision before June 16, the deadline for opposing the merger,” said an NPS spokeswoman.
The NPS said that Elliott had asked it to prevent the merger. Samsung C&T also requested the NPS to take its side. Last year, the NPS opposed a merger between Samsung Engineering and Samsung Heavy Industries.
Samsung C&T said that it will mobilize all of its resources to have as many friendly investors possible push the deal through. “We will explain why we seek to merge with Cheil Industries to the NPS and other key stakeholders,” said a spokesman for the company.
Last week, Samsung C&T CEO Choi Chi-hun flew to Hong Kong to explain the company’s plan to foreign investors based in the city. Combined stakes of foreign investors excluding Elliott are 26.63 percent, according to data from the Korea Exchange.
Some market watchers said that Samsung C&T may sell its own 5.76 percent stake to KCC, a construction company that owns a 10.18 percent stake in Cheil Industries, to have another friendly investor. By law, a company’s own stake has no voting rights.
Elliott said that it has taken legal action against Samsung C&T and its directors to prevent the merger with Cheil Industries from going ahead.
“Elliott has taken the step today of commencing legal proceedings for an injunction against Samsung C&T and its directors in order to prevent the proposed takeover from going ahead and thereby protecting the interests of Samsung C&T’s shareholders,” said the fund in a statement.
The announcement came one week after it first opposed the merger after buying a 7 percent stake in Samsung C&T. The hedge fund said that the proposed takeover was unlawful because it was neither fair nor in the best interests of company shareholders.
Elliott said that it filed an injunction with the Seoul Central District Court through its legal representative Nexus. The court is expected to make a ruling soon as the shareholders’ meeting is scheduled for July 17.
Samsung C&T said that it will prepare for the legal proceedings after receiving documents from the court. The company said that taking legal action is a common tactic for the hedge fund which has used similar methods in the past.
Last month, Samsung C&T and Cheil Industries, a fashion and resort arm of Samsung Group, agreed to merge swapping every 100 shares of Samsung C&T with 35 new Cheil Industries shares.
Market watchers said that with the merger, Samsung Group seeks to consolidate its succession process from Samsung Electronics Chairman Lee Kun-hee to his son and company Vice Chairman Jae-yong. If this is completed, Jae-yong will become the biggest shareholder of the merged entity with a 16.5 percent stake, rising to the top of the group’s hierarchy.