Samsung C&T sells 5.76% stake to KCC

Group raises friendly stake to nearly 20%

By Kim Yoo-chul

Samsung C&T said Wednesday it sold its entire holdings of treasury shares to KCC, a construction materials company, as part of its moves to fight Elliott Associates, which is seeking to prevent its merger with Cheil Industries.

The construction unit of Samsung Group sold all 8.99 million company-owned common shares or 5.79 percent to KCC for 674 billion won or 75,000 won per share, Samsung C&T said in a public notice filed with the main bourse.

KCC also owns a 10.18 percent stake in Cheil Industries.

Samsung C&T sold the stake to KCC as it can’t exercise its voting rights if it holds the stake in the form of treasury shares.

The sale of shares to KCC helped Samsung Group secure at least 19.69 percent friendly stake.

Samsung SDI holds 7.39 percent of Samsung C&T, Samsung Fire and Marine Insurance 4.79 percent, Samsung Chairman Lee Kun-hee 1.41 percent and KCC, 5.79 percent.

Elliott’s stake was still at 7.12 percent.

Samsung said the sale of the treasury shares is aimed at “passing the merger plan” at the upcoming shareholders’ meeting.

“Samsung C&T appreciate KCC’s decision for a strategic partnership. KCC also acknowledged the importance of the deal. The strategic partnership with KCC will be boosted,” Samsung C&T said in a statement.

Shareholders will vote on the merger in July, and the proposed deal needs a two-thirds majority to pass.

Samsung officials say that they can push ahead with the merger and won’t change the terms.

“Elliott won’t be able to block the merger. The fund’s ultimate goal is to realize its target gains," a Samsung official said.

Samsung Group earlier said that it will not accept Elliot’s demand that it change the share-swap ratio for the merger.

The all-stock deal proposed by Cheil Industries was by no means generous. Cheil did not offer any premium to Samsung C&T, even though it holds 4.1 percent of Samsung Electronics' shares. Under the current proposal, Samsung C&T’s shareholders can exchange 100 of their shares of 35 of Cheil’s shares.

Elliott previously said Samsung C&T was unfairly valued in the merger terms. Elliott is supported by individual and some foreign investors.

Despite the heated debate about the swap ratio, Samsung C&T said that it will not alter the merger ratio as it observed local regulations requiring companies to give greater weighting to share price over asset value.

“We followed the local regulations,” it said. “The merger is to create synergy between the affiliates and boost shareholder value.”

In the meantime, a group of retail Korean investors agreed Tuesday to lend support to Elliott, with their shares taking up 0.43 percent of the total.

Samsung C&T is expected to take steps to help boost the stock price after the shareholder meeting.

“As Samsung C&T will play a critical role in an ongoing power shift to the third generation at Samsung, its stock will rise throughout this year,” Hana-Daetoo Securities analyst Chae Sang-wook said.

Samsung C&T CEO Choi Chi-hoon plans to hold a press briefing about the issue, though the date has yet to fixed, sources said.

“Views are different. But Samsung is trying to boost Samsung C&T shareholder value,” Samsung Securities CEO Yoon Yong-am told reporters after his participation in a weekly meeting with the presidents of Samsung affiliates.

Yoon Ju-hwa, president at Cheil Industries CEO, separately told the media that the Samsung affiliate will “cope with the issue well.”