NPS opposes merger of SK affiliates

By Kim Jae-won

The National Pension Service (NPS) said Wednesday that it will oppose a merger plan between SK Holdings and SK C&C, saying it undermines SK Holdings shareholders’ interests.

The NPS, which owns a 7.19 percent stake in SK Holdings, said that it will not agree with the plan at the shareholders’ meeting of the company scheduled for Friday. The state pension fund said that the one to 0.73 merger ratio between SK C&C and SK Holdings was unfair because it was designed to benefit SK C&C shareholders.

SK Group said it understands the NPS’s opposition to the merger, but said it will continue to seek the merger.

“We understand the NPS’s opinion, but we will push for the merger because most of our shareholders agree with the plan,” said the group in a statement.

The NPS’s decision was made by its Special Committee on Exercising Voting Rights chaired by Hanyang University Professor Kim Sung-min. The nine-member committee consists of scholars and experts recommended by the government, business lobbies and labor unions among others.

Market watchers said the decision may affect to the NPS’s decision on another merger plan between Samsung C&T and Cheil Industries in which the pension fund holds key. The NPS is the largest shareholder of Samsung C&T, owning a 10 percent stake in the construction and trade affiliate of Samsung Group.

The role of the state pension fund is even bigger because U.S. hedge fund Elliott opposes the merger plan, saying it undermines interests of Samsung C&T shareholders. Elliott holds a 7.12 percent stake in the company.

The two Samsung affiliates agreed last month to merge them by the 1 to 0.35 ratio of Cheil and C&T. Shareholders’ meeting of the companies are scheduled for July 17.

Last week, Samsung Group and Elliott clashed in a local district court as the U.S. fund filed a complaint to block the companies from holding the shareholders’ meetings. Elliott claimed that the merger deal is designed to help the group’s owner family facilitate the power succession for Lee Jae-yong, the only son of the group’s patriarch Lee Kun-hee.

But Samsung refuted Elliott’s claim, saying that the merger plan is being carried out as a legitimate process in accordance with the Commercial Law. The local court will deliver its decision on the injunctions by July 1.

Industry sources said that the court is unlikely to accept Elliott’s request as the proposed merger ratio, which the hedge fund claims is damaging to Samsung C&T shareholders, is set in accordance with the local law.

The sources said Samsung and Elliott would ratchet up to prod more shareholders to support each own claim. Currently, foreign investors are estimated to hold a combined 33.6 percent in Samsung C&T, and the comparable figure for local institutions such as the NPS and other asset managers is estimated at 20 percent.

Samsung C&T and its affiliates are said to own a combined 19.95 percent.