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Mason seeks merger meddling damages

U.S. hedge fund says gov’t pressure on NPS cost it $200 million

Sept 19,2018
The New York-based hedge fund Mason Capital and Mason Management are seeking $200 million in compensation from the Korean government for losses it claimed resulted from the government’s meddling in the 2015 merger of Samsung C&T and Cheil Industries.

This is an increase from the $175 million in compensation it requested in June.

According to the Korean Ministry of Justice on Tuesday, an arbitration notification from Mason was delivered to the Korean government on Sept. 13.

Mason claims that intervention by the Park Geun-hye government to force the National Pension Fund, the country’s biggest institutional investor, to approve the merger breached “obligations under the [Korea-U.S.] FTA and International Law.”

Mason claims that if the merger was not approved on the terms it held - with Cheil Industries offering 0.35 share for each Samsung C&T share - it would not have sold shares in both Samsung C&T and Cheil Industries at a “significantly” lower price than it ended up doing.

“Korea’s measures caused the merger to take place on terms that resulted in loss and damages to Mason in an amount currently estimated to be no less than $200 million,” Mason said in the statement. “In accordance with basic principles of international law, Mason seeks compensation for those losses, including compound interest on all sums due and attorney’s fee.”

It added that Mason attempted a resolution with the Korean government through a notice of intent on June 7 but the government “refused” compensation.

Under Article 11.5 of the FTA, Korea agreed to provide covered investments “treatment in accordance with customary international law, including fair and equitable treatment and full protection and security,” Mason claimed in the arbitration notification delivered to the Justice Ministry. “Korea through its President [Park Guen-hye], the government ministers and officials and the NPS, violated the minimum standard of treatment owed to Mason’s investments, including the obligation to treat Mason’s investment in accordance with the fair and equitable treatment standard.”

Three months earlier Mason asked a minimum of $175 million from the losses it sustained due to the Korean government’s meddling in the merger.

Mason said that as of July 17, 2015, when the merger of the two Samsung affiliates was approved, it had a total investment of 3,046,915 Samsung C&T shares and 81,901 Samsung Electronics shares.

“It was clear to Mason and other investors that the proposed merger was unfair to Samsung C&T’s shareholders, and that any rational shareholder would vote against the merger,” Mason claimed. “Mason held approximately 2.18 percent of Samsung C&T shares prior to the merger vote and also [along with Elliot Management] opposed the merger.”

Elliot Management later demanded that the Korean government pay it $770 million to cover its losses from the same merger.

“Like all prominent economies, Korea obviously has no interest in being viewed hostile to foreign investors, particularly when other economies in the Asia-Pacific region are fast becoming potentially attractive alternatives,” Elliot Management claimed in a statement on July 13.

“It is regrettable that the former administration took a hostile approach to foreign investment rather than embracing it with a view of promoting domestic innovation and maintaining economic growth.”

Mason said it has appointed Elizabeth Gloster, 69, a former judge who is currently working with One Essex Court, as its arbitrator, while the Justice Ministry said it plans on choosing its own in accordance with the Korea-U.S. FTA and UN Commission on International Trade Law regulation.

A Samsung C&T spokesman refused to comment, saying it is a matter between the investor and the government.


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]


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