Ultimate goal of Elliott’s opposing Samsung C&T’s merging plan

Announcing its 7.12 percent shares of Samsung C&T Corporation, U.S. hedge fund Elliott Management made a splendid appearance to the public on June 4. With its outspoken cause of “raising shareholders’ value,” Elliott is now directly confronting the ratio of merger between Cheil Industries and Samsung C&T (1:0.35). Samsung is opposing its argument by saying that the ratio was decided based on domestic laws. The court ruled in favor of Samsung when the fund filed for an injunction for “prevention of shareholders’ resolution of Samsung C&T Corporation” and “prevention of exercising the voting rights of KCC that bought treasury stocks of Samsung C&T Corporation.”

What different logics experts have from the two sides?

Asked about “Whose argument do you think is right between Samsung C&T Corporation and Elliott?”, 38 out of 40 gave their responses. Out of those, 18 respondents (47.4 percent) said, “The both make sense.” Some 11 or 28.9 percent respondents were in favor of Samsung C&T, while eight or 21.1 percent were sided with Elliott. This shows that while Samsung Group has proceeded with its merging plan in a way that doesn’t go against the law, Elliott’s cause of raising shareholders’ value is also gaining much support.

The respondents, however, were critical of the hedge funds. Asked about “the ultimate goal of Elliott,” only three or 7.5 percent out of 40 respondents answered “the maximization of Samsung shareholders’ profit,” while most of them replied “the maximization of investment return by interfering management rights (55.0 percent)” or “short-swing profits (35.0 percent).” Among experts, overwhelmingly large respondents (86.5 percent) said that activist hedge funds such as Elliott are “greedy plunders” while only 13.5 percent responded that they are “saviors of shareholders.”

drake007@donga.com