Shares in South Korean builder Samsung C&T Corp fell on Tuesday below a key level set in its $8 billion merger with sister firm Cheil Industries Inc, on speculation an opponent to the deal may soon sell its C&T shares.
A prolonged share price fall could potentially derail the deal, but analysts downplayed the chance of a termination and said the possible exit of U.S. hedge fund Elliot Associates from the share register would remove the risk of a long court battle over the merger.
Samsung C&T said that Elliott, which launched a rare shareholder activism campaign in June in a bid to block the deal, has returned its C&T stock certificate to the Korea Securities Depository, meaning it can now sell down its 7.1 percent stake in the builder.
Samsung C&T’s shares were down 1.7 percent at 56,900 per share as of 0118 GMT, falling below the put-back option price set in the deal. Samsung C&T investors who opposed the deal can sell their shares to the company at 57,234 won per share by Aug. 6, although a C&T spokesman declined to comment on how many shares could be sold back in such a manner.
Cheil or Samsung C&T can call off the merger if the combined cost of shares being sold to Cheil Industries and Samsung C&T by their respective shareholders exceeds 1.5 trillion won ($1.28 billion).
While a stake sale by Elliot could put short-term pressure on C&T’s share price, KB Investment analyst Sally Kim said a significant portion of investors who opposed the merger had likely already sold their shares soon after the July 17 vote approving the merger.
There was little risk of the deal collapsing, Kim said, and an exit by Elliot would remove the risk of a prolonged court battle between the fund and the Samsung Group, South Korea’s top family-run conglomerate.
The Cheil-Samsung C&T merger, investors and analysts say, is key to consolidating stakes in top affiliates including Samsung Electronics Co Ltd ahead of a looming leadership succession for Samsung Group’s founder Lee family.
Elliot, which argued the merger undervalued C&T, had been expected to continue battling Samsung in the courts as a shareholder of more than 2 percent in the post-merger company.
Samsung SDI Co Ltd said on Tuesday that Elliott returned its certificate for stocks in the company, while a person familiar with the matter told Reuters that Elliott also returned its certificate for stocks in Samsung Fire & Marine Insurance Co Ltd.
($1 = 1,168.1000 won)