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

By  |  February 25, 2016

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.

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    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.

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    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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