AFP, Seoul :
A bitter dispute over the proposed merger of two Samsung affiliates comes to a head Friday with a shareholder vote that could-whatever the result-force a shift in corporate governance practice among South Korea’s giant, family-run conglomerates. In a country not known for investor activism, the campaign against the takeover of construction company Samsung C&T by affiliate Cheil Industries has been unusually loud and well organised.
Spearheading opposition to the merger is the US hedge fund Elliott Associates, which is the third largest shareholder in C&T and has unsuccessfully moved the courts to block the deal on the grounds that it significantly undervalues the construction firm.
For Samsung’s founding Lee family, the takeover is key to consolidating its grip on the multi-headed conglomerate ahead of a generational power transfer.
The family-run corporations, or “chaebol”, which dominate the South Korean economy are used to running their business their own way, with little interest in the concerns of minority shareholders.
But as companies like Samsung and LG have become global brands, they have attracted overseas investors with a strong sense of shareholder rights that is increasingly seeping into the domestic Korean investor culture.
More than 3,000 individual investors have created an online forum aimed at blocking the C&T takeover. Although their combined stake in C&T is less than one percent, the group’s mere existence is a sign of changing times.
“What we’re witnessing here is a new phase in investor-corporate interaction in South Korea,” said Charles Lee, research director for North Asia with the Hong Kong-based Asian Corporate Governance Association (ACGA).
“There is an increasing awareness, even among domestic retail investors, that the way some chaebols behave towards minority shareholders can’t go on forever,” Lee told AFP.
Samsung C&T executives argue that the merger makes good business sense and will enhance shareholder value in the long-run, and insist that the details of the all-stock deal are in full compliance with relevant laws and regulations. So far, the South Korean courts have agreed, but Elliott continues to argue that the merger is “unfair, unlawful and significantly damaging” to C&T shareholders’ interests.
The two sides have spent the weeks leading up to Friday’s vote locked in an intense campaign for shareholder support, with Samsung needing a two-thirds majority to get the merger approved.
A bitter dispute over the proposed merger of two Samsung affiliates comes to a head Friday with a shareholder vote that could-whatever the result-force a shift in corporate governance practice among South Korea’s giant, family-run conglomerates. In a country not known for investor activism, the campaign against the takeover of construction company Samsung C&T by affiliate Cheil Industries has been unusually loud and well organised.
Spearheading opposition to the merger is the US hedge fund Elliott Associates, which is the third largest shareholder in C&T and has unsuccessfully moved the courts to block the deal on the grounds that it significantly undervalues the construction firm.
For Samsung’s founding Lee family, the takeover is key to consolidating its grip on the multi-headed conglomerate ahead of a generational power transfer.
The family-run corporations, or “chaebol”, which dominate the South Korean economy are used to running their business their own way, with little interest in the concerns of minority shareholders.
But as companies like Samsung and LG have become global brands, they have attracted overseas investors with a strong sense of shareholder rights that is increasingly seeping into the domestic Korean investor culture.
More than 3,000 individual investors have created an online forum aimed at blocking the C&T takeover. Although their combined stake in C&T is less than one percent, the group’s mere existence is a sign of changing times.
“What we’re witnessing here is a new phase in investor-corporate interaction in South Korea,” said Charles Lee, research director for North Asia with the Hong Kong-based Asian Corporate Governance Association (ACGA).
“There is an increasing awareness, even among domestic retail investors, that the way some chaebols behave towards minority shareholders can’t go on forever,” Lee told AFP.
Samsung C&T executives argue that the merger makes good business sense and will enhance shareholder value in the long-run, and insist that the details of the all-stock deal are in full compliance with relevant laws and regulations. So far, the South Korean courts have agreed, but Elliott continues to argue that the merger is “unfair, unlawful and significantly damaging” to C&T shareholders’ interests.
The two sides have spent the weeks leading up to Friday’s vote locked in an intense campaign for shareholder support, with Samsung needing a two-thirds majority to get the merger approved.
