Samsung wins court battle against Elliott Associates

July 7, 2015

By Kim Yoo-chul

A Seoul court dismissed a request Tuesday by Elliott Associates to nullify the sale of Samsung C&T’s treasury shares to building materials manufacturer KCC Corporation.

The ruling dealt another blow to the U.S. hedge fund which is seeking to stop a proposed merger between Samsung C&T and its affiliate Cheil Industries.

Elliott said it will appeal the decision by the Seoul Central District Court.

Samsung C&T sold its treasury shares, which accounts for 5.76 percent of total shares, to KCC for 674 billion won (US$593.7 million) as it needs more friendly shareholders.

Samsung cannot exercise its voting rights if it holds the shares in the form of treasury shares. But if the shares are sold, the voting rights are revived.

The court said the decision to sell the treasury shares might undermine the interests of some shareholders who oppose the merger, but is not against the interests of the company itself or a larger group of general shareholders.

“KCC’s decision to buy all Samsung C&T’s common shares was, therefore, not unfair,” the court said.

KCC is the fourth-largest shareholder of Samsung C&T. Elliott, the third-largest shareholder in Samsung C&T, claims the proposed merger is unfair and that the value of Samsung C&T shares was underestimated compared to Cheil.

Elliott’s previous injunction filed with the same court to nullify Samsung’s push to hold a shareholder meeting to vote on the deal was also rejected. Elliott also appealed this issue to a higher local court.

Samsung C&T welcomed the court’s decision.

“The ruling will help us to receive support from shareholders,” Samsung C&T said in a statement.

In response, Elliott said, “We note the court’s decision but maintain our view that the deliberate sale of treasury shares, designed solely to support a fundamentally unfair deal for Samsung C&T’s shareholders, was wholly improper, not least from a corporate governance perspective.”

It said it will shortly lodge its appeal with respect to this court decision.

Samsung has gone all out to gather friendly shareholders ahead of the July 17 shareholders meeting.

The Samsung merger plan is supported by leading local institutional investors, KCC, as well as Samsung affiliates, while some foreign and retail investors are backing Elliott.

The National Pension Service is the biggest shareholder in Samsung C&T.

In the meantime, Elliott bought 1 percent stake each in Samsung Fire and Marine Insurance and Samsung SDI, another company that holds C&T.

Samsung SDI holds 7.18 percent stake in Samsung C&T, and Samsung Fire holds a 4.65 percent of Samsung C&T.