SEOUL: South Korean builder Samsung C&T Corp has lined up an ally to fend off a challenge from a US activist fund and push through a proposed US$8 billion merger seen key to allowing a smooth leadership succession at Samsung Group.
Samsung C&T said on Wednesday it would sell nine million common treasury shares to construction materials firm KCC Corp for 674 billion won (US$608 million) in a deal that would be completed by Friday and make KCC the fourth-largest individual shareholder in the company.
KCC is also a major shareholder in Cheil Industries Inc, the Samsung Group affiliate that proposed the all-stock takeover of Samsung C&T in the latest of a series of restructurings at South Korea’s biggest family run-conglomerate.
Analysts said the deal with KCC secures support for the merger that would allow the Samsung Group’s controlling Lee family to consolidate its holdings in the sprawling conglomerate ahead of a power transfer after patriarch Lee Kun-hee, 73, fell ill a year ago. He remains hospitalised.
The stake sale to KCC also sets the scene for what may be a protracted battle against Elliott, the US activist hedge fund which on Tuesday sought an injunction in South Korea to block a deal that it considers unfair to Samsung C&T shareholders.
“This is important for Samsung as it’s the first step in a succession process that requires a long time, and Samsung probably felt pressure not to be seen giving in to a foreign shareholder in that step,” said Kim Sang-jo, an economics professor at Hansung University.
Some investors and analysts say that Elliott, the third-largest shareholder in Samsung C&T, poses a threat to the merger by galvanizing further opposition to the deal. The share sale to KCC, however, could also limit potential opposition.
“Samsung must get this merger done and will do everything it can to accomplish that goal,” said Park Ju-gun, head of corporate analysis firm CEO Score.
Samsung C&T shares recorded their biggest daily gain in nearly a week and closed 10.3 per cent higher on Wednesday before the KCC announcement, buoyed by investors hopes that Elliott’s challenge may coax better terms or concessions from Cheil. — Reuters