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(2nd LD) U.S. fund opposes Samsung unit's merger proposal

2015/06/04 15:13

By Kang Yoon-seung

SEOUL, June 4 (Yonhap) -- U.S.-based hedge fund Elliott Management said Thursday it is against a proposed move by Samsung C&T Corp., a trading arm of South Korea's top conglomerate Samsung Group, to merge with its affiliate, Cheil Industries Co., as it is not in "the best interests" of shareholders.

"Elliott believes that Cheil Industries' proposed takeover of Samsung C&T significantly undervalues Samsung C&T and that the terms are neither fair to nor in the best interests of Samsung C&T's shareholders," the company said through a press release.

Elliott said it holds a 7 percent stake in Samsung C&T. Founded by Paul Singer in 1977, the U.S. hedge fund holds US$26 billion under its management.

The U.S. firm previously held a 4.95 percent stake in Samsung C&T before buying an additional 2.17 percent in shares Wednesday.

Following the additional stake purchase, Elliott emerged to become the No. 3 shareholder for Samsung C&T after the state-run National Pension Service and Samsung SDI, which hold 9.79 percent and 7.39 percent stakes, respectively.

When asked if Elliott plans to offload a part or all of its Samsung C&T shares if the plan is approved in the future, a Hong Kong-based spokesperson told Yonhap News Agency, "There's nothing more to comment on besides the release."

   At respective board meetings last month, the two Samsung units gave a nod to the plan of Cheil Industries to take over the construction and trading arm, although the new entity will still be named Samsung C&T.

Formerly known as Samsung Everland Co., Cheil Industries is the de facto holding company of Samsung Group.

The latest move came amid Samsung's possible leadership shift from Lee Kun-hee to his only son, Jay-yong, vice president of Samsung Electronics.

Once the merger is completed, Jay-yong will become the biggest shareholder of the new Samsung C&T at 16.5 percent and rise to stand at the top of the group's hierarchy.

Samsung Group, meanwhile, said that Elliott's remarks will not have a significant impact on its ongoing efforts to merge the two units.

"Other major shareholders are positive (about the merger), and share prices indicate the market is also welcoming the move," a Samsung Group official said.

Samsung Group's top communications official also said Wednesday the group still casts a bright outlook over the merger, adding any criticisms are not "believed to be the majority."

   Some analysts here, however, have been claiming that the two may fail to create synergy as they focus on different industries.

Other critics also said the main intention of Elliott is to seek profit-taking rather than to actually stop the merger deal.

Shares of Samsung C&T closed 10.32 percent higher to close at 69,500 won, while the KOSPI advanced 0.47 percent.