Pension fund delays C&T decision

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Pension fund delays C&T decision

The National Pension Service, the single largest shareholder of Samsung C&T, canceled a committee meeting Thursday to discuss its stance on the merger between Samsung C&T and Cheil Industries, clouding prospects for the merger that has been challenged by the U.S. fund Elliott Associates.

With an 11.61 percent stake in Samsung C&T, the state-run pension fund holds the key to the fate of the all-stock merger that will be put to a vote at Samsung C&T’s shareholders meeting on July 17.

“We delayed the meeting,” a source at the NPS told the Korea JoongAng Daily, “But we will still call a meeting to discuss the issue before the shareholder meeting.”

At the scheduled meeting, the NPS was expected to discuss several aspects of the high-profile deal. One of the most closely-watched points is whether it will seek outside advisors before casting its vote. In most cases, the NPS relies on an internal committee to make decisions on mergers and acquisitions involving its holding.

But when the computations are tricky, the pension service invites an external independent panel of nine members to weigh in. In a bid to ensure fairness and independence, panel members are recommended by entities including the government, research institutes and labor groups.

The external panel in the past has tended to apply stricter standards to proposed deals than the in-house committee at the pension fund. For example, the nine-member committee opposed a proposed merger between SK Holdings and SK C&C last month, saying that the merger could hurt the interests of minority shareholders. It has voiced opposition to all three of the mergers that have been referred to it this year.

Market watchers predicted that if the external panel takes the wheel again, the fund’s decision will probably be to object to the merger.

Samsung C&T has maintained that the deal would increase business synergies, but Elliott has slammed it as unfair to Samsung C&T shareholders because of the allegedly low valuation of C&T shares. Now the pension service finds itself in the awkward position of being dragged into a contentious fight between a foreign fund that is not afraid to rattle cages and a conglomerate that dominates the Korean economy. “If the NPS opposes the merger, it will face criticism that it is siding with exploitative foreign investors,” a senior officer there said gloomily. “But if it votes for the merger, the NPS will be criticized for having been manipulated by the conglomerate.”

Choi Kwang, CEO of the service, said cautiously that the service would “make a decision in a way that contributes to the economy.”

The fund’s every move has come into the spotlight recently as it also has increased its holdings in affiliates of the country’s top 30 chaebol.

According to data from CEO Score, a corporate evaluation firm, the NPS may find itself in this situation more often in the future. The firm said NPS now holds at least a 5 percent stake in 93 chaebol affiliates; the average holding in those companies is 8.7 percent. In affiliates that CEO defines as “key,” NPS influence is even greater, an average of 9.3 percent ownership. The figure is up about three-quarters of a point compared to that of a year ago.

In the tense competition between Samsung and Elliott to win more votes to their sides, the Canada Pension Plan Investment Board, which holds a 0.21 percent share in Samsung C&T, said that it will vote against the merger.

The board’s decision came after Institutional Shareholder Services, an influential proxy advisor, advised its clients to vote against the merger.


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

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