Rivals keep up drumbeat on merger

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Rivals keep up drumbeat on merger


Kim Shin

As a shareholder meeting to determine the merger between Samsung affiliates draws nearer, Samsung and U.S. activist hedge fund Elliott Associates have continued to fire salvos against each other.

Kim Shin, co-CEO of Samsung C&T, said on Wednesday that he is confident of the merger between his company and Cheil Industries on the assumption that the National Pension Service (NPS), the largest shareholder of the construction unit, will vote for it. The NPS holds an 11.6 percent stake in Samsung C&T.

When asked if he believes the state-run pension fund will decide in favor of Samsung C&T, the CEO said, “I believe the NPS will make a wise decision.”

As he came out of a regular executive meeting at the office of Samsung Electronics in Gangnam District, Kim said, “[I] view positively the upcoming NPS decision.”

“And I am confident of the prospects for the merger once the NPS votes for the merger,” the CEO said.

His remark came as Samsung and Elliott try to sway Samsung C&T shareholders from their opposing sides ahead of an extraordinary general shareholder meeting on July 17.

Kim hinted there are some foreign investors siding with Samsung.

“Local institutional investors are positive about the merger,” he said, “and some foreign investors informed us of their favorable views toward the merger.”

Shareholders on Samsung’s side - including affiliates such as Samsung SDI and Samsung Fire & Marine Insurance and other local companies like KCC - have around 20 percent of Samsung C&T shares, whereas foreign investors including Elliott have over 30 percent. The decision of the NPS is considered critical to the deal.

The pension fund received a recommendation Wednesday from a local proxy voting adviser to vote against the merger. Korea Corporate Governance Service cited the ratio of shares to be swapped as its reason to vote against the merger. But the NPS is not obliged to follow the body’s recommendation.

After a Seoul court rejected Elliott’s application for injunctions to block the deal, Institutional Shareholder Services, the influential global proxy advisory body, advised investors to vote against it.

Both Samsung C&T and Cheil Industries said they view the ISS opinion as unfair.

“[The ISS recommendation] lacks logical reasoning,” Kim Bong-Yung, co-CEO of Cheil Industries, said after the executive meeting.

ISS suggested that the merger ratio of 0.35 Cheil Industries shares for each Samsung C&T be revised to 0.95.

In an attempt to persuade shareholders, the fund sent Samsung C&T a letter describing why it opposes the deal.

Elliott slammed Cheil’s recent promise to increase its dividend payout after the merger as “meaningless efforts to appease shareholders.”

“A target of reaching a 30 percent dividend payout ratio for the combined group is actually a step backwards for Samsung C&T shareholders,” Elliott said in the letter.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]
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