Seoul: A vote on combining companies in the Samsung empire is pitting its wealthy founding family against small shareholders and foreign investors in a rare challenge to the power of South Korea's ubiquitous business conglomerates.
Shareholders at construction company Samsung C&T will vote tomorrow on the proposed takeover of it by another Samsung company, Cheil Industries. The takeover is crucial for consolidating a once-in-a-generation leadership shift at Samsung, a vast conglomerate of 67 affiliated companies with smartphone powerhouse Samsung Electronics at its center.
The business empire's ailing patriarch Lee Kun-hee has been hospitalised since May last year and his son Lee Jae-yong is assuming a bigger leadership role but lacks a significant stake in flagship company Samsung Electronics.
The proposed all-stock takeover will give him that stake without having to spend billions of dollars to buy it from other shareholders. But the deal has met unexpected opposition led by US hedge fund Elliott Associates, which owns 7.1 per cent of Samsung C&T and says the terms of the deal undervalue its shareholding.
The outcome of the vote will also influence overseas perceptions of South Korea. The country has long faced criticism that the founding families of its big business groups known as chaebol exercise too much power over companies that have become publicly traded. Those concerns about poor governance and weak shareholder rights have resulted in foreign investors marking down the value of South Korean shares.
The deal "has economic importance to us, but we think it's also important for Koreans - the way Korea and Korean corporate governance is perceived in the world," Paul Singer, founder of Elliott, said in an interview with CNBC.
In the days leading up to the vote, Samsung C&T has taken out television and front-page newspaper ads asking shareholders to vote for the takeover. It has also mobilized employees to visit shareholders with mango juice and watermelon.
Some shareholders voiced complaints on an online forum that Samsung had shared their private information with its employees without consent.
Matters took an ugly turn when business publications used anti-Semitic smears to attack Elliott and its founder. Samsung C&T yesterday removed cartoons it had posted online that depicted Singer as a ravenous big-beaked vulture.
