Two Samsung Group firms are looking at options to boost shareholder returns on completion of their proposed $8 billion merger, two people familiar with the matter said, as they seek to overcome opposition from a U.S. hedge fund.
A planned takeover by South Korea’s Cheil Industries Inc of construction firm Samsung C&T Corp is seen as critical to a stable leadership transition for Samsung’s founding Lee family. But it faces fierce opposition from activist fund Elliott, which owns 7.1 percent of Samsung C&T and has filed two injunction requests in South Korea to block the deal.
Elliott and other investors opposing the deal say Cheil’s offer undervalues the firm, noting that the book value of equities held by C&T is around $11.7 billion.
The people said steps being weighed include share buybacks or higher dividend payouts but nothing has been decided. They declined to be identified due to the sensitivity of the matter.
Cheil Industries declined to comment, and a Samsung C&T official said nothing has been decided. A spokesman for Elliott on Thursday declined to comment.
“Talk of boosting shareholder returns is an attempt at appeasement, but this won’t have a big impact,” said Park Ju-gun, head of corporate analysis firm CEO Score, adding that such moves won’t be enough to placate Elliott and others who are upset about the low valuations attached to C&T.
On Wednesday, Elliott reiterated its opposition to the deal in a regulatory filing, calling on other C&T shareholders to either vote against Cheil’s takeover offer or designate Elliott as their proxy. The vote will take place on July 17.
The all-stock takeover of Samsung C&T by Cheil would allow the consolidation of stakes in key group firms like Samsung Electronics Co Ltd under a company firmly held by the Lee family heirs.
Elliott and Samsung C&T have been trying to win over investor opinion in the closely watched merger battle, a rare case of shareholder activism in a country that has long been wary of foreign investors. Last week, both Elliott and Samsung C&T published presentations making their respective arguments.