Adviser hits C&T, Cheil merger terms

Samsung C&T shareholders should vote against a takeover by the Samsung affiliate Cheil Industries, the proxy adviser service Glass Lewis & Company said.

The merger has questionable strategic merit, poor financial terms, regressive deal protection and is an opaque process, Glass Lewis said in the report. The deal is being fought by the activist shareholder Elliott Associates.

Glass Lewis’ report comes after a more favorable assessment of the deal by a Korean court as the battle between Elliott and Korea’s biggest conglomerate continues to twist and turn ahead of a shareholders’ meeting to decide the outcome on July 17. The merger is a key part of Samsung’s attempt to complete a once-in-a-generation leadership transition.

The deal is “profoundly unattractive for SCT investors and exceedingly advantageous for Cheil,” Glass Lewis said, referring to Samsung C&T. The company’s efforts to win support “are emblematic of a boardroom more concerned with forcing a preferred transaction to completion than addressing the significant and legitimate concerns of its unaffiliated investor base,” it said.

Cheil’s takeover would tighten the grip of 47-year-old Jay Y. Lee, the Samsung founder’s grandson, as he positions himself to take control of the chaebol, a collection of 67 companies generating about $270 billion in annual revenue.

Samsung C&T owns about $10.7 billion of group company shares, making it a vital asset for Lee and his siblings who control Cheil.

BLOOMBERG