Elliott sues gov’t over merger

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Elliott sues gov’t over merger

Activist American hedge fund Elliott is preparing to sue the Korean government regarding the Park Geun-hye administration’s role in a controversial merger between Samsung C&T and Cheil Industries, after the fund’s attempt to block the deal in 2015 failed.

The hedge fund, which once held a stake of over 7 percent in Samsung C&T, sent the Ministry of Justice a letter of notice, which is a first step in filing a lawsuit against a sovereign state in an investor-state dispute settlement.

“It is true that we received the letter from Elliott in mid-April,” a spokesperson for the Ministry of Justice said.

“No decision has been made in regards to the issue as we are in the process of consulting with related government agencies.”

A foreign investor is entitled to file a claim with the International Centre for the Settlement of Investment Disputes, an international arbitration body, three months after it sends a letter of notice to the respondent state’s justice ministry.

Elliott’s public relations representative in Korea declined to comment on the details of the dispute or on the question of which Elliott unit initiated the move.

Analysts assume the fund will zero in on the allegation that the Park administration pressured the National Pension Service, the largest shareholder in Samsung C&T, to vote for the merger in an alleged collusive tie between the administration and Samsung Group.

The fund said that the merger devalued the price of Samsung’s C&T, a construction unit, and claimed that the merger was a maneuver that was meant to strengthen the control of Samsung heir Lee Jae-yong over the group.

Lee was the largest shareholder of Cheil Industries and the deal allowed him to become the largest shareholder in the new combined unit.

In the merger, each share of Samsung C&T was exchanged for 0.35 of a share in Cheil Industries.

The group said that Elliott was wrong at the time, citing synergy and transparency as reasons for the acquisition.

However, Samsung’s defense weakened significantly after a massive influence-peddling scandal that involved former President Park and her confidante Choi Soon-sil revealed suspicious ties between Samsung and Park.

A series of recent court rulings indicated that the previous administration attempted to influence the pension fund operator to approve the merger.

Moon Hyung-pyo, a former minister of health and welfare during the Park administration and subsequent chairman of the National Pension Service, was found guilty last year of abusing power in the decision and received a jail sentence of two and a half years.

Hong Wan-seon, former chief investment officer of the National Pension Service, was given the same sentence for causing losses to the retirement fund operator.

Still, the court didn’t recognize a bribe allegation from Samsung in a ruling on the former president last month.

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