Elliott’s appeal against Samsung merger rejected

The Seoul High Court on Thursday turned down U.S. hedge fund Elliott’s appeal on the injunction to block a merger deal between Samsung C&T and Cheil Industries.

Elliott had filed for an injunction to stop Samsung C&T from holding a shareholders’ meeting Friday, where the controversial merger proposal will be put to a vote.

However, the Seoul Central District Court threw out the request on July 7, prompting the hedge fund to file an appeal.

In addition to seeking to prevent the merger from being put to a vote, Elliott had filed for an injunction to prevent KCC Corp. from exercising its voting rights.

KCC Corp. is considered an ally of Samsung Group in the merger, and Samsung C&T had sold 5.76 percent of its treasury stocks to KCC Corp. in early June to counter Elliott’s opposition.

“Samsung C&T welcomes the court’s decision to allow the shareholder meeting to convene as planned. We also welcome the court’s ruling that the sale of treasury shares met all legal requirements,” Samsung Group’s trading and construction arm said Thursday.

“We strongly believe that the proposed merger is in the best interest of the company and our shareholders.”

Elliott, which is Samsung C&T’s largest foreign institutional shareholder with a 7.12 percent stake, has opposed the merger, claiming that it is unlawful and detrimental to Samsung C&T shareholders.

The hedge fund claims that the share merger ratio of 1-to-0.35, in favor of Cheil Industries – in which 0.35 share in the merged company will be issued for each Samsung C&T share held -- undervalues Samsung C&T.

Samsung fought back, trying to undermine Elliott’s credibility as an investor by citing the hedge fund’s past investments.

With the court’s decision clearing the road for the vote, Korea’s state-run National Pension Service’s decision is now considered to be the key in the planned merger vote.

At the Delivering Alpha conference hosted by CNBC and Institutional Investor in New York on Wednesday, Paul Elliott Singer said that he remains hopeful that the NPS will vote against the takeover deal.

“We have a lot of small shareholders rooting for us. And we’re still hopeful that the NPS, the pension service, they vote our way,” Singer said.

The NPS holds 11.61 percent of Samsung C&T. Of that, 11.2 percent count toward its voting rights.

By Suk Gee-hyun (monicasuk@heraldcorp.com)