Elliott confirms action against government over Samsung merger

US private equity firm Elliott confirmed Wednesday it was taking legal action against the former South Korean administration over its illegal intervention in the merger between Samsung C&T and Cheil Industries in 2015.

“Elliott is seeking to negotiate with the Republic of Korea regarding compensation for Elliott’s damages arising from the former administration’s unlawful intervention in the merger of Samsung C&T and Cheil Industries,” said a statement released by the US fund.

Elliott mentioned in the statement that the Korean government has committed to compensating investors who are victimized by breaches of the Korea-US Free Trade Agreement.

“The actions by the former administration and the National Pension Service were in breach of KORUS FTA and constituted manifestly unfair and inequitable treatment of Elliott,” it claimed.

The US fund reportedly handed in a notice of intent to Korea’s Ministry of Justice last month through the investor-state settlement system, according to news reports here.

The document is intended to ask whether the government would seek a settlement with Elliott before the US fund files a suit at the International Centre for Settlement of Investment Disputes.

If the two sides fail to agree to a settlement, it will clear the way for Elliott to sue the Korean government with the Washington-based organization three months later.

“The facts revealed since the 2015 merger are clear: The web of corruption, reaching from the president herself down to the NPS, unfairly damaged Elliott and other SC&T shareholders,” said an Elliott spokesperson, referring to former President Park Geun-hye.

The merger was widely seen as a step to enhance Samsung Electronics Vice Chairman Lee Jae-yong’s control of the family-controlled conglomerate Samsung, as his father Lee Kun-hee has been hospitalized since 2014.

Samsung C&T merged with Cheil Industries in 2015 with the support of the state pension fund NPS, which was objected by Elliott, which claimed the merger ratio of 1:0.35 for Samsung C&T and Cheil Industries was unfair for Samsung C&T shareholders.

The NPS held an 11.21 percent stake in Samsung C&T, while Elliot owned 7.12 percent.

In November 2017, the Seoul High Court ruled to imprison former Welfare Minister Moon Hyung-pyo for 2 1/2 years on charges of pressuring the NPS to approve the merger in connection with a corruption scandal involving ousted President Park.

Regarding the legal issue, Samsung Electronics and Samsung C&T both declined to comment, saying Elliott was targeting the government not Samsung.

By Song Su-hyun  (song@heraldcorp.com)