Samsung shows confidence in defeating Elliott

Samsung C&T to sell stake in its securities affiliate

By Kim Yoo-chul

Samsung Group is confident it will defeat Elliot Associates’ attempt to derail the planned merger between Samsung C&T and Cheil Industries.

Its top executives made no clear compromise on the merger ratio, a key Elliott demand.

"Just a few local brokerages are negative over the deal, while most of them support the proposed takeover," Samsung Securities CEO Yoon Yong-am told local media during his visit to the Samsung Seocho Tower for Wednesday's regular weekly meeting with presidents of Samsung affiliates.

Mentioning the latest volatile sessions for Samsung C&T stocks, Yoon said; "Samsung C&T shares have lost their gains after research notes said the proposed takeover will fail. They want the C&T-Cheil deal to close as planned; I think that is what the markets want.”

Yoon said some investors were seeking short-term "capital gains" by opposing the deal.

"Media reports say that out of 10 asset management firms, eight support the deal and two have yet to decide their position," he told reporters.

Elliott Associates, which is the third-largest shareholder in Samsung C&T, has been engaged in a dispute with the construction firm after it agreed to be taken over by Cheil Industries, in which Samsung Electronics Vice Chairman Lee Jae-yong is the major shareholder.

As per the deal, each Samsung C&T share will be exchanged for 0.35 of a share in Cheil Industries, valuing the acquisition at more than $8 billion.

Elliott, which recently increased its stake in Samsung C&T to 7.1 percent, criticized the deal, insisting that it is not in the best interests of Samsung C&T shareholders. Elliott then commenced legal proceedings for an injunction to nullify the takeover deal.

Cheil Industries CEO Yoon Ju-hwa also stressed that despite the growing challenge, the C&T-Cheil Industries deal is broadly supported by the markets.

"When the merger plan was announced, investors and markets responded. Samsung C&T shares lost value as some investors were negative whether the merger would create synergy or not," the Cheil Industries CEO Yoon told reporters.

"Samsung's management always supports increasing shareholder value for investors," he said.

Questioned over the moves by Samsung C&T to sell its stakes in Samsung Securities, Yoon said, "There are a lot of legal issues. But yes, we are handling the issue, well."

Samsung C&T plans to sell its 0.26 percent stake in Samsung Securities to more effectively battle with Elliott Associates.

The C&T-Cheil deal is subject to the approval of shareholders in both companies. They will vote on the proposal on July 17-- a two-thirds majority is required to approve the deal.

The Lee family owns just 1.4 percent of Samsung C&T, and the total holding will be less than 20 percent, if shares of affiliates and related parties are taken into account, according to CSLA, a leading research firm.

Meanwhile, Samsung hired Goldman Sachs and Credit Suisse as advisors in what Samsung officials say is a move to reach out to influential foreign research firms to prevent them from releasing reports arguing against the takeover.

"The C&T-Cheil deal is supported by leading local investors and research firms and Samsung needs to get more support from foreign investment banks and research firms. Goldman Sachs and Credit Suisse are long-time Samsung allies on major issues," said a Samsung official.

Sources said Credit Suisse recently stopped covering both C&T and Cheil. It's a common pattern for investment banks to order their analysts to stop covering firms they are involved with in an advisory role.