Samsung C&T EGM approves Cheil Industries' $8-bn takeover offer

17 Jul 2015

Shareholders of Samsung C&T Corporation today approved an $8-billion takeover offer from sister firm Cheil Industries Inc, in a close voting, that would facilitate a planned leadership change at South Korea's biggest conglomerate.

Samsung C&T Corporation, established in 1938, is the original company of the Samsung Group and currently consists of the engineering and construction, and trading and investment groups.

Cheil Industries started in 1954 a a textile firm and has diversified into fashion, leisure chemicals and electronic chemical materials. Samsung's founding Lee family holds a 42-per cent stake.

Samsung Group's Lee family secured the support of 69.53 per cent of the company's shareholders for the merger at an extraordinary general meeting (EGM).

The all-stock offer from Cheil needed the backing of two-thirds of the votes cast to succeed.

The merger consolidates stakes in key group affiliates, including flagship tech giant Samsung Electronics Co, under the control of the heirs of the founding Lee family.

The company expects the transaction to be completed by 1 September 2015.

Samsung Group's 73-year-old patriarch, Lee Kun-hee, remains hospitalised following a heart attack last year.

The merger was vehemently opposed by US activist hedge fund Elliott Associates, C&T's third-largest shareholder with a 7.1-per cent stake.

Elliott, which argued that Cheil's offer undervalued the company, is expected to remain an irritant for Samsung Group despite today's vote.

Elliot filed for two injunctions to stop the vote taking place while calling on other shareholders to oppose the merger.

''Through this merger, Cheil Industries and Samsung C&T will secure new momentum for sustainable future growth. We will enhance the value of the merged company to meet the expectations of our shareholders by maximizing synergies from the strengths of the two companies.

''We will listen to those who opposed the deal and pledge to better engage with our shareholders and be more open to their input and feedback.

''We will implement initiatives we have announced aimed at enhancing shareholder value. We will also work toward achieving global excellence in our business and expanding the benefits with society,'' Samsung C&T sated in release.

The company also promised to put top priority on enhancing the value of the company for shareholders, and ''to become a company that is loved by shareholders, customers and society.''

Investors and analysts expect Elliott to continue challenging Samsung with lawsuits. The fund would hold more than 2 per cent in the merged entity based on the terms of the deal.

C&T expects Elliot to continue to reflect its disappointment in the merged entity as well in future.

Shares in both C&T and Cheil fell sharply after the vote, dropping 7.9 per cent and 5.2 per cent respectively by 0455 GMT, as the potential for sweetened bid terms disappeared.

In a statement, the US fund said, "Elliott is disappointed that the takeover appears to have been approved against the wishes of so many independent shareholders and reserves all options at its disposal."

C&T's biggest shareholder, South Korea's National Pension Service (NPS), cast its 11.2 per cent voting stake in favour of the deal, said a person with direct knowledge of the matter, providing decisive support for Samsung.