Elliott’s argument that the proposed merger between Samsung C&T and Cheil Industries undervalues Samsung C&T and goes against the interests of shareholders is widely received, but for local institutional investors, it is not easy to make a decision. (image: Yonhap)
SEOUL, June 11 (Korea Bizwire) – As the struggle between American hedge fund Elliott Associates and Samsung Group continues, local institutional investors find themselves in the difficult position of having to choose sides.
Elliott’s argument that the proposed merger between Samsung C&T and Cheil Industries undervalues Samsung C&T and goes against the interests of shareholders is widely received, but for local institutional investors, it is not easy to make a decision.
If they oppose the merger, they could be criticized for siding with a foreign hedge fund. On the other hand, if they side with Samsung but there is a feeling that the estimation of the value of Samsung C&T shares is too low, institutional investors could face strong protests from their own shareholders.
According to the merger plan, Cheil Industries will offer 0.35 new shares for every Samsung C&T share, which Samsung C&T shareholders consider undervalued.
An asset management firm which owns shares of Samsung C&T said, “We are in a grey area – it’s hard to agree with or to oppose the merger. It is obvious that the merger ratio is unfavorable to Samsung C&T. But if we oppose the merger, we will be criticized for helping the hedge fund.“
Another institutional investor said, “In the long-term, the merger between Samsung C&T and Cheil Industries will raise the value of the merged company. However, unfavorable management right transitions can burden the overall stock market.”
Under these circumstances, the National Pension Service, the largest shareholder of Samsung C&T, is also weighing its decision.
By M. H. Lee (mhlee@koreabizwire.com)
