U.S. investor Elliott Associates is taking legal actions against the South Korean government, claiming Seoul unlawfully exerted influence on the controversial merger of two Samsung units in 2015, industry sources said Tuesday.
Samsung C&T Corp. merged with Cheil Industries Inc. in 2015 despite the protest from Elliott on the back of the support from the National Pension Service (NPS). The NPS held a 11.21 percent stake in Samsung C&T during the deal, while Elliott accounted for 7.12 percent.
The deal was widely seen as a step to enhance Lee Jae-yong's control of the family-controlled conglomerate Samsung, as his father Lee Kun-hee suffered a heart attack in 2014 and has been hospitalized since.
Elliott said the deal will have an adverse impact on shareholders' interests, claiming the merger ratio of 1:0.35 for Samsung C&T and Cheil Industries was unfair for Samsung C&T shareholders.
Through the investor-state dispute settlement system, industry sources said Elliott recently handed in the Notice of Intent to South Korea's justice ministry.
Industry watchers said the document asks whether the government has intentions to seek settlement with Elliott before it officially files a suit at the Washington-based International Centre for Settlement of Investment Disputes. Elliott claimed that the government unlawfully intervened in the merger process through the NPS.
In November last year, the Seoul High Court upheld the sentence of 2 1/2 years in prison for Moon Hyung-pyo, a former health and welfare minister, for pressuring the NPS to approve the merger in connection with a corruption scandal involving ousted President Park Geun-hye.
Elliott will be qualified to sue the South Korean government at the Washington-based organization three months after sending the Notice of Intent.
Samsung did not make any official statement on the updates.
The South Korean conglomerate has been under fire after Lee Jae-yong was imprisoned for around a year for his connection to Park's political scandal. He was released in February and has been remaining low-key since.
As Elliott's move targets the South Korean government, industry watchers said it would not be necessary for Samsung to open a statement, although the conglomerate is still keeping a watchful eye on the issue.
"We were not notified nor were aware of the fact that Elliott sent the Notice of Intent to the justice ministry," a Samsung official said.
Industry watchers said Elliott was widely expected to seek investor-state dispute when its efforts to stop the merger ended in vain.
Others claimed Elliott is taking the action to pressure Hyundai Motor Group. The U.S. fund also recently demanded that Hyundai should merge Hyundai Motor Co. and Hyundai Mobis Co. and establish a holding company. (Yonhap)