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Abu Dhabi, UAEMonday 15 October 2018

Elliott demands $770m from Korea over Samsung merger fallout

The hedge fund sought damages to preserve reputation among international investors

Paul Singer, founder and chief executive of hedge fund Elliott Management Corporation said a notice had been sent to the South Korean government over what it claimed was unfair meddling in the Samsung merger. (AP Photo/John Minchillo, files)
Paul Singer, founder and chief executive of hedge fund Elliott Management Corporation said a notice had been sent to the South Korean government over what it claimed was unfair meddling in the Samsung merger. (AP Photo/John Minchillo, files)

Elliott Management Corporation said it was seeking compensation for at least $770m in damages from South Korea over how its former administration intervened in the merger of Samsung C&T Corporation and Cheil Industries in 2015.

Billionaire Paul Singer’s New York-based hedge fund said in a statement Friday it had submitted the dispute for arbitration and urged the government to pay the damages in order to preserve its reputation with international investors. Elliott said, to date, the parties have been unable to resolve the matter on their own.

“Like all prominent economies, Korea obviously has no interest in being viewed as hostile to foreign investors, particularly when other economies in the Asia-Pacific region are fast becoming potentially attractive alternatives," Elliott said in the statement.

The South Korean government acknowledged they received the notice in a separate statement.

Elliott lost a proxy fight to oppose the combination of the Samsung units, solidifying the founding family’s grip over the group. Samsung narrowly won the vote, clinching support from the government-run National Pension Service. Elliott claims the government unfairly meddled in the deal, which led to a massive corruption scandal in the country.

NPS sided with Samsung after pressure from the presidential office, landing the minister, who was then in charge of the pension fund, in jail. Elliott, which owned about 7 per cent of Samsung C&T at the time, says it incurred significant damages as a result of the former administration’s hand in allowing the merger to go through.

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Samsung Vice Chairman Jay Y Lee, who’s been leading the group after his father slipped into a coma, walked free from prison earlier this year after his sentence for bribery in connection to the deal was suspended. Park Geun-Hye, South Korea’s first female president, was sentenced to 24 years in prison after being found guilty on charges including bribery and abuse of power.

“It is regrettable that the former administration took a hostile approach to foreign investment rather than embracing it with a view to promoting domestic innovation and maintaining economic growth,” Elliott said Friday.

Another Samsung investor, Mason Capital Management, has also served a notice of intent to the government, saying it incurred $175m in damages related to the actions of the former administration.

Elliott encouraged the South Korean government to uphold its obligations toward foreign investors, including paying the damages, working to prevent future breaches, and taking steps to no longer shield the ruling families at the expense of investors.

"Maintaining credibility internationally among investors is critical to attracting foreign investment and propelling Korea to even greater prosperity," Elliott said.

Earlier this year, Elliott waged another fight in South Korea against Hyundai Motor Group. In May, the automotive giant bowed to pressure from the activist and shelved its $8.8bn restructuring plan, marking an unprecedented victory for shareholder activism in the country.