Samsung Affiliates' Merger Plan Gets Challenged Over Deal's Price Tag

NEW YORK (The Deal) -- Paul Singer's Elliott Management has intervened in an intra-family merger of Samsung Group companies, stating that Cheil Industries' planned $8 billion-plus purchase of construction company Samsung C&T is priced too low.

Elliott said on Thursday that conglomerate Cheil's stock offer "significantly undervalues Samsung C&T and that the terms are neither fair to nor in the best interests of Samsung C&T's shareholders."

The company also disclosed that it had built a 7% stake in Samsung C&T.

The May 26 agreement between the two Samsung group affiliates was seen as reflecting efforts by Samsung Group's controlling Lee family to shore up control as Chairman Lee Kun-hee continues to suffer health problems following a heart attack a year ago.

In a merger the companies planned to close by September, Cheil would offer 0.35 of a share for every Samsung C&T share, while the enlarged entity would take the Samsung C&T name. The Lee family, which exerts its influence on the 70-plus companies in the Samsung Group empire through a series of cross shareholdings, would have about 30% of the enlarged Samsung C&T. Lee's son, and heir Jay Y. Lee, would have the largest slice of that holding.

Samsung Group is the largest South Korean chaebol, a local form of multi-tentacled conglomerate backed by powerful family shareholders.

Samsung C&T on Thursday defended the deal following Elliott's intervention, saying it is designed to increase shareholder value. It noted that the share-exchange ratio was determined according to local regulations.

Samsung C&T closed up 10.2% at 69,500 won ($62.41), valuing its equity at 10.9 trillion won ($9.8 billion).

But Cheil Industries closed up just under 5% at 191,000 won, valuing the stock at 25.8 trillion won. Based on that price, the stock offer values Samsung C&T's equity at 10.4 trillion won ($9.3 billion).

Elsewhere in Asia, Elliott is currently challenging Bank of East Asia's  HK$6.6 billion ($850 million) share sale to Sumitomo Mitsui Banking in a Hong Kong court. Elliott is probably best known outside the U.S. for blocking Argentina's debt restructuring.

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