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Shareholders of two Samsung units approve merger

Shareholders of Samsung C&T Corp. and Cheil Industries Inc., two key units of Samsung Group, voted for their merger on Friday, paving the way for a smooth leadership transfer at South Korea's top conglomerate.

The approval is expected to boost Samsung's plan to hand over the group leadership to Lee Jay-yong, the son of the group's patriarch Lee Kun-hee, who has been bedridden for more than a year after a heart attack.

It also marks a victory for South Korea's most powerful corporate empire against U.S. hedge fund Elliott Associates, which sought to block the merger, calling it a low-ball deal.

At an emergency shareholder meeting, 69.53 percent of Samsung C&T shareholders gave the nod to the proposal to merge with Cheil Industries Inc., the group's de facto holding firm.

The company needed yes votes from two-thirds of the attendance, or 55.7 percent, and a third of outstanding shares to proceed with the merger plan. The attendance rate came to 83.6 percent.

Cheil Industries also passed the takeover bid in an unanimous vote from 2,773 shareholders, or 85.8 percent of the shares, at a separate shareholder meeting held around the same time.

In late May, the two Samsung units announced the plan for a merger, claiming the proposed all-stock deal worth 8.9 trillion won

($7.8 billion) will create synergy for the new entity, with a high growth potential in construction, food and beverages and biopharmaceuticals to a global reach.

The merged entity is scheduled to set sail on Sept. 1. If the merger is completed, Jay-yong will emerge as the biggest shareholder of the merged entity with a 16.5 percent stake, cementing his grip on the sprawling business empire.

Before casting ballots, Samsung C&T shareholders engaged in a heated debate over the pros and cons of the proposed merger.

"Elliott has been opposing the move, and there has been various reports regarding to our intent," Choi Young-ik, a lawyer representing Elliot, said at the meeting. "This merger must not be approved as around 7 to 8 trillion won of our assets will be handed over to Cheil Industries without any compensation."

Elliott, the third-largest shareholder in Samsung C&T, claimed several advisory firms have backed its stance, saying that Samsung is oppressing shareholders by selling treasury shares, which amounts to a 5.96 percent stake, to KCC Corp. in a bid to win approval for the merger at the shareholder meeting.

"There must be another intent behind the move to forcibly conduct the merger despite strong opposition," Elliot said. "We basically support the restructuring move, but it should be conducted in a more shareholder-friendly way."

Supporters stressed the merger should be carried out as proposed, saying it could help Samsung C&T find sources of growth.

"Samsung C&T has grown a lot via a merger of Samsung's trade and construction units. Around 20 years have passed since, and it is now very hard to continue growth with the existing businesses,"an individual shareholder said.

Samsung C&T and Elliott have been embroiled in a proxy fight to gather more votes for each other's claim. Samsung took out an massive ad campaign via local media outlets, urging shareholders to support the plan.

Elliott applied for court injunctions in Seoul to stop the Friday shareholder meeting and nullify the builder's treasury shares sale to one of its shareholders.

Last week, the Seoul Central District Court threw down Elliot's requests and the Seoul High Court rejected appeals on both cases Thursday. (Yonhap)