S.Korean court rules in favor of Samsung merger against U.S. hedge fund

A South Korean court on Tuesday ruled in favor of a merger plan of two Samsung Group subsidiaries, rejecting a U.S. hedge fund's request for injunction against the plan.

The Seoul Central District Court rejected the call by U.S. hedge fund Elliott to prohibit Samsung C&T from selling 8.99 million treasury shares, or 5.76 percent stake, to KCC Corp., a friendly shareholder of Samsung. The treasury shares have no power in the shareholders' meeting as companies cannot vote for themselves.

With the court ruling, the treasury shares sold by Samsung C&T to KCC would act in favor of Samsung at the July 17 shareholders' meeting, where the merger plan of Samsung C&T and Cheil Industries could be approved.

Cheil Industries, the de-facto holding company of Samsung Group, South Korea's largest family-run conglomerate, had announced a plan to acquire Samsung C&T, the group's construction and trading unit as part of efforts for a generational power transfer.

The management succession from Chairman Lee Kun-hee, who has been bedridden since May last year following heart attack, to his only son Lee Jae-yong has been under way by merging, breaking out and listing some of the group's affiliates.

Cheil's acquisition of Samsung C&T, which has a 4.1 percent stake in the group's crown jewel Samsung Electronics, would facilitate the founding Lee family's father-to-son succession.

On July 1, the court also ruled in favor of Samsung, rejecting a separate request by Elliott to stop Cheil Industries from acquiring Samsung C&T. The U.S. hedge fund immediately appealed against the ruling.

Elliott increased its stake last month in Samsung C&T to 7.12 percent, opposing to the merger plan for the reason of the construction and trading unit's undervaluation. The merger ratio was 0.35 Cheil Industries shares for each Samsung C&T share. Endi