South Korea's financial regulators are likely to launch an investigation to find out whether there were illegalities in the process of the merger between Samsung C&T and Cheil Industries, which resulted in the creation of the new Samsung C&T.
During the annual parliamentary audit of government offices, held September 14-15, Financial Services Commission (FSC) Chairman Yim Jong-yong and Financial Supervisory Service (FSS) Governor Zhin Woong-seob said that they would launch a probe into whether a Samsung affiliate had meddled in the process of the Cheil-Samsung C&T merger” when opposition lawmakers cast suspicion on the legality of the merger.
According to opposition lawmakers, Samsung Life Insurance, which had its clients’ money managed by many other asset management companies, had allegedly pressured the asset management companies to vote in favor of the merger.
“I’ve received a tip that Samsung Life Insurance proved its loyalty to controlling stockholders by forcing asset management companies to say yes to the Cheil-Samsung C&T merger deal,” said Rep. Kim Ki-sik of the main opposition New Politics Alliance for Democracy (NPAD).
“All the naysayers (institutions) had a sudden change of heart and backed the merger following Samsung Life Insurance’s alleged meddling. Samsung Life Insurance’s assets are what its clients trusted the insurer with. If it is true that Samsung Life Insurance did exert its influence by dangling clients’ money before them, it can be construed as a violation of its fiduciary duty,” Rep. Kim pointed out.
“That kind of influence peddling is unacceptable. I will get to the bottom of it,” said FSC Chairman Yim Jong-yong. “We will take action if the allegation proves to be true,” FSS Governor Zhin Woong-seob also mentioned.
Meanwhile, in the run-up to the Cheil-Samsung C&T merger, proxy advisers in and outside the nation opposed the merger, saying that the 1:0.35 share swap ratio between Cheil and Samsung C&T was not in the best interests of Samsung C&T shareholders.
Seoul-based proxy advisers Sustinvest and the Korea Corporate Governance Service (KCGS) voiced their opposition to the merger deal. In June, Sustinvest issued a written opinion saying that “the timing of the merger is extremely disadvantageous to minority shareholders” and sent it to eight Korean asset management firms and investment advisors.
In July, the KCGS, the National Pension Service (NPS)’s own proxy voting adviser, concurred with Sustinvest’s view on the merger and recommended the NPS (the largest shareholder of Samsung C&T) to vote against the merger.
Institutional Shareholder Services (ISS) and Glass Lewis & Co., two of the most influential proxy advisory firms, also told investors to reject the merger.
Opposition lawmakers plan to summon Samsung Electronics Vice Chairman Lee Jae-yong to an annual parliamentary inspection of the NPS, slated for October 5.