Samsung C&T Co., the construction arm of Samsung Group, said Wednesday its plan to merge with the group’s de facto holding firm doesn’t hurt shareholders’ interests, refuting a U.S. hedge fund’s claim that the builder is undervalued.
In late May, Samsung C&T unveiled the plan to merge with Cheil Industries Inc. in a move widely seen as aimed at paving the way for a leadership change at South Korea’s top family-controlled conglomerate. The plan calls for Cheil Industries to offer 0.35 new share for every Samsung C&T share, which Samsung C&T shareholders consider undervalued.
In a regulatory filing last Thursday, Elliot Management said it hiked its stake in Samsung C&T to 7.12 percent, venting displeasure over the merger proposal. Elliot, the No. 3 shareholder of the builder, filed a court injunction on Tuesday to stop the merger.
“Considering the uncertainties of the future, we believe that generating synergies through a merger in the near future and pushing up the value of the companies will be more beneficial to shareholders,” a Samsung C&T source said.
Elliot claims that the proposed merger is “neither fair to nor in the best interests of shareholders.”
Other investors also suspect Samsung C&T intentionally picked the timing of the merger as the firm’s price-to-book value ratio came to 0.67 in the first quarter of 2015. A ratio of less than 1 suggests the firm is undervalued on the stock market.
Samsung also denied such a claim, adding the weak PBR is “attributable to the slump in the construction industry over the past years and gloomy outlooks.”
The merger plan must win approval from shareholders with two-thirds of the voting rights and a third of outstanding shares in order to pass a shareholder meeting scheduled for July 17.
The National Pension Service, which owns 9.92 percent of Samsung C&T, and other local institutions will likely throw their support behind Samsung, while overseas investors are anticipated to side with Elliott, according to the watchers.
But Samsung and Elliott are expected to continue to engage in a fierce battle to drum up shareholder support until the meeting.
A South Korean group of retail investors, meanwhile, agreed Tuesday to lend support to Elliott, with their shares taking up 0.43 percent of the total. Founded by Paul Singer in 1977, the hedge fund holds US$26 billion under its management. (Yonhap)
