The prospect of a merger between Samsung C&T and Cheil Industries, which had seemed a slam dunk to everyone following the deal, has suddenly dimmed as an American hedge fund with a 7-percent stake in Samsung C&T declared opposition to the union. An official with Elliott Associates L.P., a New York-based asset management firm, said on June 4, "[The proposed takeover of Cheil Industries by Samsung C&T] significantly undervalues Samsung C&T and isn't in the best interests of Samsung C&T shareholders."
Established in 1977, Elliott Associates is known as one of the most activist hedge funds in the United States. Its assets under management is estimated at US$26 billion. Earlier on May 26, Cheiil Industries and Samsung C&T announced the merger. The merger ratio between the two Samsung Group companies based on their market capitalization was 1 to 0.35. If the merger is culminated, Samsung C&T shareholders will receive 0.35 share of Cheil Industries for each Samsung C&T share.
Cho Yoon-ho, Dongbu Securities analyst, said, "In order to get one share of Cheil Industries, Samsung C&T shareholders must give away three shares, which is no doubt an unfair deal to Samsung C&T shareholders." Another analyst commented, "It is no surprise if the merger ratio reversed if it was based on asset value. Samsung C&T is being merged to Cheil at a price less than its book value."
Yuanta Securities analyst Choi Nam-gon also said, "It seems like the American hedge fund is trying to thwart the merger deal by organizing detractors. Once it succeeds in foiling the deal, it will try to raise the stock price and take profit."
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