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 At an often-heated shareholder meeting, investors in builder Samsung
C&T Corp approved an all-share takeover offer from sister firm Cheil
Industries Inc, Samsung's de facto holding company - but only just.
With the backing of two-thirds of votes cast needed for success,
some 69.53 percent of shares voted supported the tie-up.
U.S. hedge fund Elliott Associates, with a 7.1 percent Samsung C&T
stake, had led the charge against the deal, saying it undervalued
the target. That view was shared by an impassioned group of domestic
retail investors, who saw a merger that bolsters the Lee family's
control of Samsung Electronics Co as riding roughshod over minority
interests.
"While the deal will boost Samsung's restructuring, Samsung lost the
faith of a lot of foreign and minority shareholders," said Kang
Dong-oh, a proxy representative for an online forum of minority
shareholders against the merger.
Each of the two firms has stakes in key Samsung companies, including
flagship tech giant Samsung Electronics. With 73-year-old group
patriarch Lee Kun-hee hospitalized following a heart attack last
year, the C&T-Cheil merger consolidates holdings into one entity
firmly under the control of 47-year-old heir-apparent Jay Y. Lee and
his two sisters.
Investors and analysts predict the Lees may now attempt to further
consolidate control of Samsung Electronics by having it acquire IT
services firm Samsung SDS Co Ltd, or even by splitting Samsung
Electronics into an operating company and a holding company through
which they can exert control.
Samsung has promised post-deal measures including higher dividends
and a governance committee. "We will listen to those who opposed the
deal and pledge to better engage with our shareholders and be more
open to their input and feedback," C&T and Cheil said in a joint
statement.
Shares in both C&T and Cheil fell sharply after the vote, dropping
10.4 percent and 7.7 percent respectively, as those among investors
who had been hoping bid terms might be sweetened exited the stocks.
'SCARY SHAREHOLDERS'
Even though it fell short on Friday, Elliott's campaign is expected
to compel other family conglomerates, or 'chaebols', which dominate
the Korean economy, to be more mindful of minority investors. South
Korean stocks often trade at discounts to global peers due to opaque
shareholding structures and low dividends.
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"The chaebols won't be able to simply have their way anymore. They
have probably all realized now how scary shareholders and the market
can be," said Park Jung-hoon, fund manager at HDC Asset Management.
During the spat Elliott filed for two injunctions to stop the vote
taking place. With a stake of more than 2 percent in the merged
entity, deal-watchers expect it to continue challenging Samsung with
lawsuits.
"Elliott is disappointed that the takeover appears to have been
approved against the wishes of so many independent shareholders and
reserves all options at its disposal," the fund said in a statement.
Turnout for the vote was high, with 83.57 percent of eligible votes
cast. Roughly 1,000 people crowded a conference hall and three
overflow rooms reserved for the meeting in southern Seoul.
C&T's biggest shareholder, South Korea's National Pension Service
(NPS), cast its 11.2 percent voting stake in favor of the deal, said
a person with direct knowledge of the matter, providing decisive
support for Samsung.
The NPS made its decision without consulting an external committee
that it sometimes calls upon for difficult votes - and which often
votes against company management. The committee on Friday made a
rare statement saying it was regrettable that it was not consulted.
The pension fund declined to comment.
(Additional reporting and writing by Se Young Lee; Editing by
Kenneth Maxwell and Tony Munroe)
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