SEOUL, Aug. 6 (Korea Bizwire) — U.S. hedge fund Elliott Associates said Thursday it has requested that Samsung C&T buy back part of its stake in the South Korean construction firm, a move in line with its opposition against a key merger deal carried out by the country’s top conglomerate, Samsung Group.
Thursday is the deadline for shareholders of Samsung C&T to file claims with the builder to repurchase their shares in opposition to the planned merger with Cheil Industries, the group’s de facto holding firm.
The merger bid by the two Samsung units, deemed vital to the generational leadership succession at South Korea’s most powerful conglomerate, has been challenged by Elliott, the third-largest shareholder in Samsung C&T, which claimed it needs to be stopped as it is a low-ball deal.
Elliott’s attempt has so far failed as the two Samsung units won shareholder approval of the merger plan at respective shareholder meetings on July 17.
Elliott has recently exercised an appraisal right for some of its 7.12 percent stake in the construction unit of Samsung, a local source representing the U.S. firm said, without giving details on the size of the stake it sold.
According to analysts, the hedge fund can sell back up to 4.95 percent as the local rule states that a share buyback claim must be made only for the stake that had been owned before the merger announcement. Elliott has raised its stake in Samsung C&T with an additional 2.17 percent, a week after the deal was made public.
Elliott’s decision comes as a surprise since it was widely expected that it wouldn’t sell down the shares given that it had bought them for as high as 60,000 won per share.
Samsung C&T said it will buy them back for 57,234 won per share, which means that the possible stake sale for Elliott now entails losses.
Shares of Samsung C&T have tumbled nearly 14 percent following the shareholder approval on the merger bid. It had spiked 25 percent after the merger announcement until the vote.
The builder was trading at 55,600 won on the Seoul bourse as of 2:30 p.m., down 2.8 percent from Wednesday’s close.
Elliott said the request for a share buyback sale came as part of an extended effort to reinforce its earlier argument that the proposed merger is unfair and unlawful.
“(The firm) is looking into all possible options related to the outcome of the shareholder meeting last month to protect its rights and value as a shareholder,” it added.
The 8.9 trillion-won (US$7.59 billion) all-stock deal can be called off if the share buyback claims exceed 1.5 trillion won, or 17 percent of Samsung C&T shares that are entitled to such rights.
Analysts have played down the possibility of the merger being derailed by share buyback claims, since Samsung C&T has piled up more than 2 trillion won in cash to make compensations, according to their estimates.