Elliott Demands Due Diligence Release in Samsung C&T-Cheil Deal

Elliott Associates LP, the U.S. hedge fund seeking to block the merger of two Samsung Group affiliates, demanded Samsung C&T Corp. release all documents related to its due diligence on the “hastily announced” deal.

Samsung C&T’s proposed takeover by Cheil Industries Inc. “has all the hallmarks of a rush job by a board with questionable independence,” Elliott said in a presentation published online on Friday. The fund called for the release of C&T’s evaluations of its business prospects, its reverse due diligence on Cheil as well as its tax and legal analysis.

The latest salvo in Elliott’s battle with South Korea’s biggest conglomerate comes as the country’s state-run pension, which has the potential swing vote when the proposal is put to shareholders next month, opposed a similar deal by another conglomerate this week. Samsung C&T also confirmed today another U.S. hedge fund, Mason Capital Management LLC, bought a 2.2 percent stake.

The assertions in Elliott’s presentation are “simply an attempt to distract investors” and the proposed deal is “clearly in the best interests” of shareholders, Samsung C&T responded in an e-mail.

Samsung Group’s Lee family is trying to complete the deal to solidify control of the conglomerate amid a once-in-a-generation leadership transition, with patriarch Lee Kun Hee hospitalized since last year following a heart attack.

Samsung is hiding behind Korea merger rules to justify Cheil’s offer price for C&T that undervalues the company, Elliott said.


South Korean law require mergers to happen based on a pre-determined formula that averages stock prices over the preceding month. The regulation is designed to protect minority shareholders by preventing family-run groups from bailing out affiliates through exorbitantly high offers.

“The inflexibility of these statutory requirements means that it is critically important that directors do not approve any takeover transaction at a time when the applicable merger ratio would not be in the best interests of Samsung C&T shareholders,” Elliott said.

In a similar case, investors at SK Holdings Co. and SK C&C Co. approved a plan for the two SK Group affiliates to merge, paving the way for billionaire Chey Tae Won to solidify his family’s control over the country’s third-largest conglomerate.

The National Pension Service, South Korea’s biggest institutional investor with more than $400 billion in assets, this week made the rare move of opposing the SK deal on grounds it would undermine minority investors.

The NPS owns 10.15 percent of Samsung C&T, making it the largest investor, while Elliott’s 7.12 percent stake ranks third.

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