Elliott Associates, the hedge fund managed by Paul Singer obtained support from South Korean shareholders to stop the proposed merger of Samsung C&T with Cheil Industries.
According to Reuters, South Korea is a country with a record of being unfriendly to foreign capital, but in a rare situation, some local investors decided to break that tradition by supporting Elliott Associates.
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During the past few days, hundreds of small shareholders in South Korea joined together in an online public forum to oppose the proposal of Cheil Industries to acquire Samsung C&T for approximately $8.9 billion, which they called a low-ball takeover offer.
Market observer noted that the action of the small shareholders in South Korea was uncommon because the chaebol or big-family conglomerates were considered pillars of the country’s economy. The opponents of the merger emphasized that appealing to a sense of patriotism is no longer acceptable to close a deal.
“This is my retirement money. I have to protect my assets,” said one of the shareholders who claimed that he owns 7,000 shares of Samsung C&T shares, in the online forums.
Samsung Group’s Lee Family want to merge Samsung C&T and Cheil Industries to tighten control over the company’s various businesses including its crown jewel, Samsung Electronics. Opponents of the merger said the Lee Family should pay a higher price.
Elliott Associates the third largest shareholder of Samsung C&T with 7.1% stake in the company. The hedge fund said the merger was not fair and not in the best interest of shareholders because the deal undervalues the Samsung C&T significantly.
Some of the retail investors known as “ants” in the local trading circles based on the size of their stockholdings became unusually vocal in their opposition to the merger. Some of them expressed support to Elliott Associates and even offered their proxy to vote on the deal during the shareholder meeting.
“The practice of demanding sacrifice from only the ants needs to change,” said one investor on Paxnet, a popular site for retail investors.
Nam Dong-woo, head of equities at Eastspring Asset Management commented, “We who live in this country have to be careful speaking about Samsung, but when someone from the outside is this vocal, we can then say ‘yes, this is right, and Elliott is doing the right thing.”
Elliott filed court injunctions against Samsung C&T merger
Elliott Associates filed court injunctions to prevent Samsung C&T’s merger. The hedge fund also sent letters to the major stockholders of the company including South Korea’s National Pension Service and Samsung SDI to vote against the detail.
Yoon Suk-keun, CEO of Ilsung Pharmaceuticals, which owns 2.1% stake in Samsung C&T believe that Cheil Industries’ takeover offer undervalues Samsung C&T. Ilsung Pharmaceuticals hasn’t decided how it would vote and did not plan to work with Elliott Associates on the issue.
Last week, Samsung C&T announced its decision to delist its depositary receipts (DRs) in United Kingdom. It was reported that the move was part of its strategy to stop Elliott Associates’ legal action against the merger. The South Korean company denied the report and explained that its DRs in UK are “being delisted because the trading volume had been marginal since 2013.
Samsung C&T said, “The reports that the move was carried out to influence lawsuits by overseas investors in Britain or elsewhere is not true.”