US/South Korea: Elliott faces probe over alleged violation in Samsung merger

US activist investor Paul Singer’s Elliott Associates faces a disclosure probe over an alleged violation of local rules when it tried to block merger of two Samsung Group affiliates last year. South Korea’s local regulations mandate that a trader issue a public disclosure within five days of acquiring over 5% in a listed company.

As detailed by ValueWalk, last year Samsung Electronics Co Ltd’s controlling Lee family won a merger of two Samsung affiliates by a thin margin. However, before the shareholder vote on July 17, Elliott initiated a fierce campaign against the merger proposal, arguing that the merger would only benefit shareholders of Cheil Industries, in particular, the Lee family.

Earlier, the Seoul High Court rejected an appeal filed by Elliott Associates to block the Samsung C&T merger. The hedge fund contended that the merger would be unfair and unlawful and significantly damage the interests of Samsung C&T shareholders.

Paul Singer’s $27 billion hedge fund initially held a 4.95% stake in Samsung C&T’s construction company. Elliott boosted its stake in the company to 7.12% and launched an opposition to the merger between Samsung C&T and Samsung Group’s holding company Cheil Industries.

It was felt that Elliott Associates violated a local law that mandates public disclosure within five days of acquiring over 5% in a listed company. Korean authorities suspected that Elliott already controlled the increased number of shares through a total return swap negotiated with brokerage houses before the June 2 disclosure.

Full content: Finance Asia

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