Following the Seoul Central District Court's decision in favor of Samsung C&T Corporation, the U.S. activist fund Elliott said it would continue to make efforts to block a proposed merger of two Samsung Group units.
"We were disappointed with the court's decision but we will continue to stick to our stance that the merger is unfair and is against shareholders' interest," according to the statement released by the American firm on Wednesday.
As the third largest shareholder of Samsung C&T Corporation holding a 7.12 percent stake, Elliott called the ratio of merger with Cheil and Samsung into question whose ratio is 1:0.35. Elliot claimed that Samsung C&T was undervalued. It said that the ratio should be decided based on Samsung C&T's asset value along with market capitalization. When Samsung's land, factory and facilities are all added, the asset value (29.5 trillion won) of Samsung C&T outweighs that (9.5 trillion won) of Cheil Industries.
For the claim that the ratio of merger between Samsung C&T Corporation and Cheil Industries is unfair, the court, however, sided with Samsung C&T Corporation, saying, "When a company decides ratio of merger based on the Capital Market Act, we cannot say that the ratio is unfair."
Elliot claimed the ratio of merger is unfair on the ground that Samsung's shares are undervalued and Cheil's shares are overvalued.
In regard with this, the court said, "Shares of listed companies are formed based on diverse factors by multiple investors. Share price in the open market reflects value of listed companies relatively objectively."
The court also added that, "There is no data that Samsung C&T management is pursuing the merger for the sake of the owner family regardless of the shareholders' interests."
Earlier on June 10, Elliot asked the court to block the approval of merger between the two companies and on June 11 it filed a suit to block Samsung from selling its treasury stock to KCC and to block it from exercising voting right based on the stocks. Elliott said the merger aims to make the succession of the owner family smoother instead of the interests of the company."
For the court decision, Samsung said it is "a natural result," adding that, "We welcome the court's decision and we think it is a natural result as the merger is fair and legitimate."
Financial experts said that the court's decision would give an edge to Samsung in the legal battle down the road. They say Samsung has around 35.5 percent stake favorable to the merger.
The shareholders favorable to the merger are Samsung SDI (a 7.39 percent stake), Samsung Insurance (4.79%), Lee Kun-hee, chief of Samsung Group (1.41%) and Samsung Foundation (0.23%) and KCC (5.96%). Other asset management companies including Korea Investment Management are to reportedly vote in favor of the merger. Their stake is estimated to stand at around 7.5 percent.
While Samsung C&T Corporation's second largest shareholder the National Pension Service is putting off its stance, industry watchers are expecting that they would eventually turn in favor of the merger when considering the interests of the pension holders. Since the company announced the merger, its stock price has also surged. In addition to this, Samsung has already secured 8 percent of potential shares favorable to the merger centering on foreign pension funds which are long-term investors of the company.
The merger between Samsung C&T Corporation and Cheil Industries is set to be confirmed at the general shareholders' meeting on July 17.
