Elliott Associates Makes Next Move In Samsung Battle

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So far, however, the road has not been buttery smooth. The American firm led by billionaire activist investor Singer is urging investors to spurn the deal to merge Samsung C&T and Cheil Industries as it says the all-stock deal – which will see Cheil Industries tendering 0.35 new shares for each Samsung C&T share – is disadvantageous to shareholders because it undervalues Samsung C&T shares while mostly just benefiting the Lee family.

Samsung says, nevertheless, that should the new resulting firm, to be called Samsung C&T, become a reality, synergies in their construction business will be brought about while Cheil Industries’ fashion and resorts business will be boosted by Samsung C&T’s global network. Samsung says that the resulting firm is expected to have annual revenue of about 60 trillion won in 2020 ($5.28 billion), 76% more than the separate firms’ combined revenues of 34 trillion won ($2.99 billion) last year.

Proxy adviser firms Glass Lewis and ISS are taking a stand with Elliott Associates, and appear to believe the spin by Samsung is nothing more than that: a spin. Glass Lewis, like Elliott Associates, says that the deal undervalues Samsung C&T shares. Rejecting the deal, which would mean that Samsung C&T and Cheil Industries do not get two-thirds of votes in the upcoming shareholder poll, could mean that Samsung C&T shares may plunge by up to 23%, Glass Lewis says, but this risk is better than locking in an undervaluation of the firm’s shares. Moreover, ISS says the deal significantly disadvantages Samsung C&T shareholders. ISS also says in its announcement of opposition to the deal that the synergies Samsung suggests the firm will have do not make up for the undervaluation of Samsung C&T shares. The deal hinges too much on Cheil Industries’ growth, the proxy advisory firm adds.

Disclosure: None

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