Cheil pledges higher dividends after merger

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Cheil pledges higher dividends after merger


From left: Kim Bong-young, head of Cheil Industries’ resort business department; Yoon Joo-hwa, president of Cheil’s fashion business department; and Kim Shin, president of Samsung C&T’s trading and investment group, participate in an investor relations meeting at the Conrad Hotel in Yeouido, western Seoul, Tuesday. Provided by Cheil Industries

Cheil Industries, the de facto holding company of Samsung, promised higher dividend return ratios for shareholders Tuesday when the merger with Samsung C&T is completed.

The announcement during an irregular investor relations session is Samsung’s latest effort to convince investors of the benefits of the proposed merger between Cheil and Samsung C&T, after the plan was challenged by U.S. activist hedge fund Elliott Associates.

Yoon Joo-hwa, head of Cheil’s fashion division, said the company will increase the dividend payout ratio to 30 percent by 2020 from its current 21 percent.

“We will gradually raise the ratio considering the company’s investments,” he said.

The executive also made it clear there’s no alternative plan if the merger falls through at the meeting scheduled for July 17.

Elliott Associates, the third-largest shareholder of Samsung C&T, has sought injunctions to block the meeting from being held, saying the merger is unfair to Samsung C&T shareholders.

The court is scheduled to rule on the case Wednesday.

Yoon also pledged to form a corporate governance committee consisting of outside directors to safeguard shareholders’ interests.

This is the first time a Samsung unit will have such a body, implicitly highlighting the importance the group attaches to the planned merger.

“We will continue to communicate with stakeholders [when the merger is completed] to ensure independence,” said Yoon. “The members will consist of outside directors, and the body will review transactions, as well as mergers and acquisitions.”

The session was also attended by Kim Shin, head of Samsung C&T’s trade business, and Yang Cheol-bo, a director at the group’s biopharmaceutical arm Samsung Bioepis.

The Samsung heads also took a swipe at Elliott, saying they won’t revise the merger ratio. Elliott insists the proposed ratio of 1:0.35 inflates Cheil’s value.

Participating Samsung heads devoted much of the session to explaining the expected benefits of the merger, though many observers see the merger as a move to strengthen control of Samsung’s owning family - especially Jay Y. Lee, the only son of ailing Chairman Lee Kun-hee.

Since the younger Lee is the top shareholder of Cheil, Lee will also become the largest shareholder of the entity that owns stakes in Samsung Electronics and other key affiliates.

Kim of Samsung C&T said the combined entity will further grow since Cheil is the major stakeholder of Samsung Bioepis.

Bioepis announced Monday it is considering going public on the Nasdaq, planning to raise about 1.5 trillion won ($1.3 billion).

The new Samsung C&T will become the largest shareholder of biopharmaceutical company Samsung Biologics, with a 51.2 percent stake. Cheil Industries holds a 46.3 percent and Samsung C&T owns 4.9 percent.

Samsung Biologics is the largest shareholder of Samsung Bioepis.

The group has reiterated that the bio industry is a promising area, as reflected in Samsung Group’s investment of more than $2 billion in biopharmaceuticals, especially generic drugs or biosimilars.

“When people consider the long-term value and Cheil’s position as a de facto holding company, the proposed ratio can be seen as rational,” Yoon said.

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