U.S.-based hedge fund blocks Samsung's management succession

A U.S.-based hedge fund showed its willingness to block the management succession of Samsung Group by participating in the management of a construction unit of the South Korea's largest family-run conglomerate.

The Elliott Management raised its stake in the group's construction unit Samsung C&T from 4.95 percent to 7.12 percent Wednesday, according to the Financial Supervisory Service (FSC) on Thursday.

The hedge fund became the third-largest shareholder of Samsung C&T, followed by the National Pension Service (NPS) with a stake of 9.79 percent and Samsung SDI with a 7.39-percent stake.

Elliott said that it bought the stake to join the construction firm's management, noting that the proposed merger plan between Samsung C&T and Cheil Industries, the group's de-facto holding company, undervalued the builder significantly.

The purchase came as Samsung embarked on the leadership succession from Samsung Electronics Chairman Lee Kun-hee to his only son Lee Jae-yong, 46, after the elder Lee was hospitalized for heart attack in May 2014.

The merger between the two affiliates of the group was widely expected to strengthen the younger Lee's grip on the conglomerate as Samsung C&T has stakes in the group's crown jewel Samsung Electronics.

The Elliott Management, set up by famous hedge fund manager Paul Elliott Singer in 1977, is composed of Elliott Associates and Elliott International that have about 26 billion U.S. dollars under management.

Elliott is known for its investment strategy, under which it complains first about the undervalued stakes and takes huge profits when the share prices rise later, according to local media reports.

If the merger plan fails, Elliott was expected to suffer losses as the hedge fund bought the shares at a relatively high price. The hedge fund was forecast to form an alliance with other foreign investors to block the leadership transition of Samsung Group. Endi