US hedge fund seeks court action

US hedge fund Elliott said on Thursday it would file a lawsuit against a proposed stock sale aimed to facilitate the merger of two Samsung Group affiliates.

The fund said it would apply for a court injunction against Samsung C&T's move to sell treasury shares to chemicals maker KCC Corp., one of its friendly shareholders, to bolster its hand in confrontation over its controversial merger with Cheil Industries.

Elliott has already begun legal proceedings for a separate injunction at a South Korean court to block the proposed merger, which would see Cheil Industries acquire Samsung C&T Corp through an all-stock deal.

Elliott said Thursday the proposed stock sale to KCC is a "desperate and unlawful attempt" by Samsung "to shore up voting support for the unlawful proposal for a takeover of Samsung C&T by Cheil Industries."

"Elliott has therefore been forced to apply for urgent injunctions against Samsung C&T, its directors and KCC in order to seek to prevent the treasury shares concerned from becoming shares which can be voted in respect of the proposed takeover, and thereby protect the interests of Samsung C&T’s shareholders", it said.

Samsung C&T on Wednesday decided to sell all of its 8.99 million Treasury shares to KCC, a move that would increase voting support for the merger to 19.75 percent from 13.99 percent.

Treasury shares are useless in voting contests as companies cannot vote for themselves.

Samsung C&T vowed to follow through with the merger which it said would push up shareholders' value in the future.

Elliott is the third-largest shareholder of Samsung C&T with a 7.1 percent stake.

It has urged other investors to oppose the takeover, which it claims would divert more than 58 percent of Samsung C&T's net assets out of the hands of its shareholders and into the hands of Cheil Industries' shareholders.

South Korea's National Pension Service is Samsung C&T's largest shareholder, with a 10 percent stake.

Cheil is the de facto holding company for Samsung Group, a $270 billion business empire.

The family-run group, currently controlled by Lee Kun-Hee, has merged, broken out or newly listed some of its key units in recent years as he prepares to hand over the reins to his son, J.Y. Lee.

The Lee family controls the vast Samsung Group via a complex web of cross shareholdings between the group's subsidiaries, including Samsung Electronics -- the group's flagship unit and the world's top maker of smartphones and mobile phones.

Samsung C&T has a four percent stake in Samsung Electronics.

The Lee family 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.
Source: AFP