Elliott stays positive on Samsung

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Elliott stays positive on Samsung

Ahead of a Samsung shareholders meeting today to confirm heir-apparent Lee Jae-yong as a board member, Paul Singer, the activist investor behind American hedge fund Elliott Management, is upbeat about Samsung Electronics’ public comments that executives at the Korean tech giant are receptive to the ideas recently put forward by his firm.

“We are optimistic about that one - we think it’s a tremendous platform and a tremendous value,” he was quoted as saying by The Wall Street Journal during the WSJDLive 2016 global technology conference in California on Tuesday.

Earlier this month in an open letter to Samsung, Elliott made several proposals to address issues that “depressed shareholder value at Samsung Electronics over time.” They recommended the conglomerate split into a listed holding company and listed operating company, hand out dividends of 30 trillion won ($27 billion) to shareholders and add at least three “truly independent” directors to the boards of both the holding and operating companies.

Singer’s remarks come as Samsung is slated to hold an extraordinary shareholders meeting today to vote on whether to appoint its vice chairman and heir-apparent as a board member. Lee Jae-yong, the only son of Samsung Group Chairman Lee Kun-hee, was nominated to the post on Sept. 12, and should his appointment be approved, he will assume larger responsibility over the nation’s most valuable company.

Samsung is also scheduled to announce its third-quarter earnings results today.

Elliott is one of Samsung Electronics’ minority shareholders, with a mere 0.62 percent stake worth around 1.37 trillion won. It is more than the 0.59 percent owned by Lee Jae-yong, who wields more power in the company.

The timing of Elliott’s recommendations earlier this month is notable. Just six days after releasing the letter, Samsung Electronics announced its decision to completely halt production of the doomed Galaxy Note7 device and recall all models.

Singer, however, takes no credit for it, saying his firm’s efforts to push for changes at Samsung were “unrelated to the product problems, which doesn’t shake or shatter our belief about the possibility of changes that could reward holders of the company’s stock,” the Wall Street Journal reported.

Many industry observers in Korea are still hesitant to label the hedge fund as friend or foe. Some say its goal is merely to reap as much in dividends as possible should its proposal be accepted and then sell off its stock.

Today’s shareholders meeting is expected to proceed smoothly. Friendly stakeholders including various Samsung subsidiaries and the National Pension Service which own a nearly 40 percent stake combined are likely to give a nod to Lee’s appointment. ISS, the world’s biggest proxy firm, also encouraged Samsung shareholders to issue a green light.

Seoul-based proxy firm Sustinvest, though, on Monday made a rare case urging shareholders to oppose Lee’s appointment. The firm said in a letter to shareholders that the 48-year-old scion has benefited from inter-affiliate transactions and argued that the business practice, which is rampant among Korean conglomerates, undermines corporate value because it excludes the possibility of better deals.


BY SEO JI-EUN [seo.jieun@joongang.co.kr]

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