U.S. hedge fund steps up campaign against $8 billion Samsung asset shake-up

By Se Young Lee
A man walks at the Samsung Electronics' headquarters in Seoul January 7, 2015. REUTERS/Kim Hong-Ji

By Se Young Lee

SEOUL (Reuters) - U.S. hedge fund Elliott ramped up a campaign to block a proposed $8 billion merger of two Samsung Group firms on Thursday, laying out its case online a day before a court hearing on a deal seen key to a leadership succession in the family-run conglomerate.

Escalating what is already a rare case of shareholder activism in South Korea, the fund put online a 27-page paper detailing why shareholders in construction firm Samsung C&T Corp should reject the all-stock takeover offer from sister company Cheil Industries Inc.

Elliott has already said it believes Cheil's offer is too low, and its opposition could galvanize other investors. On Friday, a South Korean court will hear the fund's injunctions, which seek to block a July 17 C&T shareholder vote on the merger as well as C&T's attempt to sway the vote in the deal's favor by selling shares to ally KCC Corp.

"They are trying to show they have a strategy that could benefit not only Samsung C&T shareholders but also investors in other Samsung companies," said Kim Sang-jo, economics professor at Hansung University, referring to Elliott's online document.

The merger is critical for Samsung Group's restructuring, which is aimed at cementing a generational leadership succession

at South Korea's biggest and most influential chaebol. The deal would combine various stakes in the group held into a firm controlled by the children of founder family patriarch Lee Kun-hee, who remains hospitalized since a May 2014 heart attack.

Some institutional and local retail investors, also say the deal undervalues C&T and plan to vote against it in the July meeting.

Samsung Group needs the support of least two-thirds of the votes cast at the C&T shareholder meeting for the deal to proceed. In an apparent concession to Elliott, Samsung C&T said on Thursday its shareholders would vote on the fund's proposal to allow for non-cash dividends at the July 17 meeting.

In a statement, Elliott said it supported the conglomerate's restructuring needs but said the group should "properly recognize" Samsung C&T's value.

C&T said on Thursday it was committed to moving ahead with the merger to "maximize shareholder value". The company has hired Goldman Sachs and Credit Suisse as advisors on the deal, and its top executives have met investors to win support.

Cheil said in a separate filing that South Korea's antitrust regulator has approved the firm's takeover of Samsung C&T, clearing a regulatory hurdle.

(Additional reporting by Sohee Kim; Editing by Tony Munroe and Miral Fahmy)