A court in South Korea ruled against an effort by American activist investor Paul Singer’s Elliott Associates to block an upcoming shareholders’ vote on a proposed merger between two Samsung subsidiaries.
According to analysts, the merger is a key piece in the succession plan of the family that controls Samsung. The electronics and manufacturing giant is South Korea’s leading family-controlled conglomerate, and is controlled via a complicated web of shareholdings among the firm’s subsidiaries. The merger of these two main subsidiaries will create a holding company more in line with global standards and will make it easier for the family to maintain control.
More on planned Samsung merger
Singer and Elliott Associates were trying to stop the transfer of power move at Samsung by filing a request for an injunction with a Seoul District Court. Elliott was asking the court to stop the construction and engineering-focused Samsung C&T Corporation from holding a shareholders’ meeting on July 17th to vote on an $8 billion takeover bid from Samsung subsidiary Cheil Industries.
Elliott currently holds a 7.12% stake in Samsung C&T, is claiming the all-stock merger offer from Cheil “grossly undervalues” Samsung C&T. The legal filing from Elliott argued the merger would serve the family that controls the Samsung conglomerate, but was not in the best interests of all of the shareholders.
The district court ruled in favor of Samsung on Wednesday, saying that the merger offer valuing each Samsung C&T stock at 35% of a Cheil share, was fully compliant with a domestic law under which merger ratios are calculated using a formula determined on the basis of recent stock prices.
“There is no data proving that Samsung C&T management is promoting the merger only for the interests of the Samsung Group chairman’s family and in disregard of the interests of its shareholders,” the court noted in its relatively brief ruling.
The ruling also pointed out that the value of Samsung C&T shares has gone up since the merger plan was announced more than a month ago, which also undermines Elliott’s argument that the deal did not sufficiently benefit shareholders.