ISS recommends no vote on Samsung deal

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ISS recommends no vote on Samsung deal

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Institutional Shareholder Services (ISS), the influential proxy advisory service, sided with U.S. activist fund Elliott Associates on Friday, challenging Samsung Group’s planned merger of Samsung C&T and Cheil Industries.

Investors in Samsung C&T should decline Cheil Industries’ all-stock buyout offer when the deal comes to a shareholder vote on July 17, the proxy advisory firm was quoted as saying by Bloomberg News.

The ISS also noted that management’s revenue targets for the merged company are “hugely optimistic.”

The recommendations of ISS, a subsidiary of Vestar Capital Partners, are considered authoritative by investors worldwide. ISS serves some 1,700 clients.

The announcement came after another proxy adviser service, Glass Lewis & Company, also said Samsung C&T shareholders should vote against a takeover by Cheil Industries.

U.S. activists Elliott Associates continues its fight against Samsung, saying that it will appeal a Seoul court ruling that dismissed a request for an injunction aimed at blocking the merger.

The Seoul Central District Court ruled in favor of Samsung C&T on Wednesday, saying Samsung’s merger proposal complies with legal requirements.

But the fund vowed to stay active against the deal.

“Elliott has today filed a notice of appeal in respect of that court’s decision and is confident that its position will be fully vindicated on appeal,” Elliott said in a statement.

The fund applied for two injunctions: one to block the shareholder meeting on July 17 from being held and the other to nullify Samsung C&T’s sale of treasury shares to KCC.

The court has yet to decide on the latter motion, with a plan to rule before July 17.

Besides its own legal proceedings, the activist fund is embroiled in lawsuits waged by local audit companies.

Deloitte Anjin, a contracted financial service provider of Samsung C&T, filed a complaint against Elliott on allegations that the fund falsely stated Anjin’s senior accountants as its proxies in a reference statement.

This is not the first time that a local firm has sued the activist fund. EY Han Young also initiated a legal battle, accusing Elliott of manipulating its report and revealing it to a third party without the company’s consent.

Elliott is the third-largest shareholder of Samsung C&T. The hedge fund suggested Friday that the current board of Samsung C&T be replaced.

In response to Elliott’s push, Cheil Industries promised a higher dividend payout and more independent governance when the deal is completed.

Samsung C&T needs two-thirds of participating shareholders to agree with the plan.


BY PARK EUN-JEE, SOHN HAE-YONG [park.eunjee@joongang.co.kr ]

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