US fund ac­cuses Sam­sung of foul play over stock sale

The China Post - - WORLD BUSINESS -

U.S. hedge fund El­liott urged a South Korean court Fri­day to ap­prove an in­junc­tion against the pro­posed merger of two Sam­sung units, in­sist­ing it is aimed at fa­cil­i­tat­ing a gen­er­a­tional power trans­fer rather than act­ing in the in­ter­est of share­hold­ers.

Sam­sung said the planned merger is le­git­i­mate and would not hurt the value of share­hold­ers, ac­cus­ing the U.S. fund of fil­ing a law­suit aimed at tak­ing away high div­i­dends.

The Seoul Cen­tral Dis­trict Court promised to rule on July 1 on the dis­pute, which pits El­liott against South Korea’s rich­est fam­ily, who con­trol the US$270 bil­lion Sam­sung busi­ness em­pire.

The planned merger, which would see Cheil In­dus­tries ac­quire Sam­sung C&T Corp through an all­stock deal, is the latest in a se­ries of moves by Sam­sung’s found­ing Lee fam­ily to boost con­trol over the con­glom­er­ate.

In re­cent years, the group con­trolled by hos­pi­talised Sam­sung pa­tri­arch Lee Kun-Hee has merged, bro­ken out or newly listed some key units as he pre­pares to hand over the reins to his son, J.Y. Lee.

El­liott has filed sep­a­rate in­junc­tions aimed at block­ing Sam­sung’s friendly share­holder, KCC Corp, from vot­ing at the meet­ing of share­hold­ers next month.

At Fri­day’s hear­ing, Sam­sung re­but­ted El­liott’s claim that Cheil In­dus­tries, the group’s vir­tual hold­ing com­pany, was us­ing il­licit means to low­ball Sam­sung C&T’s mi­nor­ity share­hold­ers, ac­cord­ing to the Yon­hap news agency.

Sam­sung said the merger ra­tio of 0.35 Cheil In­dus­tries shares for one Sam­sung C&T share is a fair of­fer based on their cur­rent share prices.

El­liott, the third-largest share­holder of Sam­sung C&T with a 7.1- per­cent stake, in­sisted the merger was based on an un­der­es­ti­ma­tion of Sam­sung C&T’s value and an ex­ag­ger­ated as­sess­ment of Cheil In­dus­tries.

The fund also said the merger ra­tio was not prop­erly cal­cu­lated.

“The merger ... is aimed at fa­cil­i­tat­ing the trans­fer of fam­ily lead­er­ship, not for the in­ter­ests of Sam­sung C&T,” the U.S. fund said through lawyers cited by Yon­hap.

Sam­sung C&T con­trols a 4.1 per­cent stake in Sam­sung Elec­tron­ics, the group’s flag­ship unit and the world’s top maker of smart­phones and mo­bile phones.

El­liott ac­cused the Lee fam­ily of seek­ing to ac­quire the stake in an ef­fort to strengthen con­trol over Sam­sung Elec­tron­ics.

The Lee fam­ily, which con­trols the group via a com­plex web of cross share­hold­ings be­tween its sub­sidiaries, cur­rently has a less than five per­cent stake in Sam­sung Elec­tron­ics, a hold­ing that will be boosted by the merger.

Re­cent health prob­lems con­cern­ing the se­nior Lee, cur­rently bedrid­den af­ter suf­fer­ing a heart at­tack last year, prompted the group to step up restruc­tur­ing ef­forts.

The group, com­prised of dozens of units rang­ing from elec­tron­ics to ho­tels, earns a col­lec­tive rev­enue equal to around 20 per­cent of South Korea’s an­nual eco­nomic out­put.

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