Seoul court denies Elliott's appeal bids against Samsung merger

By Kim Seung-yeon SEOUL, July 16 (Yonhap) -- A South Korean court rejected Thursday a U.S. hedge fund's request to block a vote by Samsung C&T Corp. shareholders on a high-stakes merger with a sister firm, clearing the legal hurdle on the eve of a crucial shareholder meeting. The Seoul High Court also turned down Elliot Associates' appeal of a district court's rejection of an injunction request to nullify the voting rights of KCC Corp., which increased its stake in the builder through a treasury share purchase. Earlier this month, the Seoul Central District Court dismissed both requests by Elliot, the third-largest shareholder in Samsung C&T. The fund strongly opposes the merger, claiming the deal undervalues Samsung C&T and hurts the interests of its shareholders. Shareholders of Samsung C&T are scheduled to meet on Friday to vote on the 8.9 trillion won (US$7.76 billion) all-stock takeover offer by Cheil Industries Inc., the de facto holding firm of South Korea's top conglomerate. The hedge fund, led by activist billionaire Paul Singer, has claimed that the merger plan undermines the value of Samsung C&T and the shareholders' interests, since the terms of the merger are based on an underestimation of the builder's value while greatly inflating that of Cheil Industries. In its ruling, the district court said that the merger ratio of 0.35 Cheil Industries share for 1 Samsung C&T share -- one of the contentious issues raised by Elliott -- cannot be seen as unfair since it was set based on their share prices as required by law. It also ruled in favor of Samsung C&T in the treasury shares sale to KCC, saying it "doesn't go against social norms." Market watchers said the court's dismissal of the appeals has cleared the legal hurdles for the Samsung units' move to push through the merger considered key to a smooth leadership transfer for the controlling Lee family. Lee Jay-yong, the 47-year-old son of the group's patriarch Lee Kun-hee, needs to tighten his grip on ownership in the absence of his father who has been ill in bed for more than a year due to a heart attack. Samsung C&T and Elliott have been embroiled in a proxy fight to win more votes for each other's claims, wooing shareholders to their sides through heated media campaigns. elly@yna.co.kr (END)