SEOUL: A South Korean appeals court on Thursday rejected the latest effort by US hedge fund Elliott Associates to block the $8.0 billion merger of two Samsung affiliates.
The ruling by the Seoul High Court clears any final obstacle to the convening of a shareholders’ meeting on Friday which will see a vote on the proposed takeover of construction company Samsung C&T by affiliate Cheil Industries.
Elliott Associates, which is the second largest single shareholder in C&T, opposes the takeover, saying it significantly undervalues the company’s stock.
The dispute is being seen as a landmark challenge to the often opaque and self-serving business practises of the giant, family-run conglomerates, or “chaebol,” that dominate South Korea’s economy.
The hedge fund filed two suits: one seeking to prevent the shareholders’ meeting from taking place and another to halt Samsung C&T’s sale of treasury stocks to a “friendly” shareholder, chemicals maker KCC Corp.
Elliot argued that the treasury stocks’ sale was unfairly aimed at boosting the pro-merger vote.
Both suits were dismissed in district court earlier this month, prompting Elliott to appeal to the higher court.
“The court has rejected the appeals, upholding the lower court decisions,” a Seoul High Court spokesman told AFP.
Samsung welcomed the ruling as “further confirmation” that the proposed merger was in C&T shareholders’ best interests.
For Samsung’s founding Lee family, the takeover is key to consolidating its grip on the multi-headed conglomerate ahead of a generational power transfer from ailing patriarch Lee Kun-Hee.
Cheil is the de facto holding company of Samsung Group — South Korea’s dominant chaebol run by the country’s wealthiest family.
The family already controls Cheil and taking over C&T would solidify its grip on the entire conglomerate because the affiliate holds more than $10 billion in shares of Samsung Group units.
The result of Friday’s vote is still very much in the balance, with both sides running intense campaigns in recent weeks to drum up shareholder support.
Samsung needs a two-thirds majority to get the merger approved.