U.S. fund Elliott files court appeal to block $8 billion Samsung deal

[July 03, 2015] By Se Young Lee and Joyce Lee

SEOUL (Reuters) - U.S. activist hedge fund Elliott Associates escalated its battle to block a $8 billion merger of two Samsung Group [SAGR.UL] firms on Friday, filing an appeal against a South Korean court ruling in a fresh bid to block a key shareholder vote.

Elliott wants shareholders to reject the all-stock takeover bid by Samsung Group de facto holding firm Cheil Industries Inc for Samsung C&T Corp, saying the offer undervalues the construction company in which it is the third largest shareholder.

In a rare case of investor activism in South Korea, Elliott has taken to the courts to try and block the deal, which analysts say is key to consolidating various stakes in top affiliates of the sprawling family-run Samsung conglomerate ahead of a looming leadership succession.

Samsung C&T's biggest shareholder, South Korea's National Pension Service (NPS), meanwhile, has increased its holdings in the company by around 1.7 percentage points to around 11.9 percent in June, likely giving it a more decisive shareholder vote in the proposed merger with Cheil.

Elliott which holds a 7.1 percent stake in Samsung C&T, has so far filed for two injunctions in South Korea and urged other C&T investors to vote against the deal.

On Wednesday, the Seoul Central District Court denied Elliott's injunction request to block a Samsung C&T shareholders vote on July 17. Elliott on Friday filed to appeal this decision.

"Elliott remains committed to preventing the Proposed Takeover from being consummated," the fund said in a statement.

A Samsung C&T spokesman said the company would take necessary measures to ensure the deal will be completed. It was not clear when the Seoul High Court will issue a ruling on the appeal.

Cheil and Samsung C&T have been lobbying shareholders to support the merger, promising greater post-merger shareholder returns and an improved governance structure to protect investor interests. Two-thirds of those present at the meeting and one-third of all shares have to vote yes for the merger to go through.

An NPS spokeswoman declined to comment on the rationale for the pension fund's stake increase in Samsung C&T but some analysts said the move may have to do with opportunistic stock buying.

"NPS entrusts to outside managers about half of its around 84 trillion won in local stock investments. The increase in holdings appears to be simply because Samsung C&T's share price went up," said Park Ju-gun, head of research firm CEO Score.

Samsung C&T shares rose 5 percent in June, compared to a 1.9 percent drop in the wider market.

(Editing by Miral Fahmy and Muralikumar Anantharaman)

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