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William Pesek

A Challenge to Samsung's Ruling Family

An activist investor is just what Korea's biggest company needs.
Watch the throne.

Watch the throne.

Photographer: JUNG YEON-JE/AFP/Getty Images

Paul Elliott Singer's recent investment in Samsung might seem innocent enough. But the powerful family that controls South Korea's biggest company wouldn't be wrong to see it as a declaration of "war," as Heo Pil Seok of Midas International Asset Management puts it. Singer's move may prove a nightmare for the Lee clan -- and, precisely for that reason, it's a tremendous opportunity for Korea's economy.

Singer's stake in Samsung C&T, the company's construction subsidiary, may be small at 7.12 percent. But the investment is terribly ill-timed for Lee Jae Yong, who has been minding the family business while his father has been ailing. In recent weeks, Lee has been trying to buy out shareholders in Samsung C&T through the family's de facto holding company. Some investors cried foul, arguing the move would consolidate Lee's power at their expense, as the subsidiary is worth more than the proposed $9.4 billion price.