Elliott wins up to $108.5M settlement from gov't

Elliott logo [ELLIOTT]

The Korean government has been ordered to pay up to $108.5 million to U.S. hedge fund Elliott as an international tribunal partially accepted Elliott's $770 million damage claim that a 2015 merger of Samsung C&T and Cheil Industries incurred a substantial loss.

The Permanent Court of Arbitration ruled Tuesday that the Korean government pay $53 million to Elliott in damages, representing 7 percent of its initial claim, as well as interest and legal fees.

The dispute centers around a 2015 merger deal between two Samsung affiliates - Samsung C&T and Cheil Industries - that Elliott opposed, claiming the deal greatly undervalues Samsung C&T shareholders' interest.

It accused the former Park Geun-hye administration of pressuring the National Pension Service (NPS), at the time the largest stakeholder of Samsung C&T, to approve the deal.

It also claimed the merger would tighten then-Samsung heir Lee Jae-yong's influence over the affiliates.

Elliott at the time held a minority share of 7.1 percent in Samsung C&T, while NPS had an 11.2 percent stake. Despite Elliott's objections, the deal went through, with NPS lending its support as a swing voter.

The deal later became the center of a major corruption case involving former President Park and the heads of major conglomerates in Korea.

At the time, former health minister Moon Hyung-pyo received a jail term for pressuring the NPS to approve the Samsung units' merger.

Last year, Korea's Supreme Court upheld a two-and-a-half-year jail term for Moon.

Elliott used the ruling to support its damage claim with the international tribunal.

The U.S. company said in a statement Tuesday the case is "the first Investor-State Dispute [ISDS] case in Asia in which an investment firm engaged in shareholder activism has prevailed against a sovereign based on criminal corruption emanating from the head of state."

Korea's Ministry of Justice said it will review the settlement closely and make a more detailed announcement about its future plans.

The Korean government can file for an annulment of the international tribunal's ruling.

The latest settlement is likely to have influence over five other ISDS cases involving Korea.

U.S. hedge fund Mason Capital Management also sued the Korean government in 2018, claiming $175 million in damages caused by the controversial deal. The company had a 2.18 percent stake in Samsung C&T and was opposed to the merger.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]