that was sure to stir up terrible PR?
Samsung argued that this was an attempt to consolidate business units,
but it was ultimately about the primacy of the ruling family. Jay Lee owned
a 23 percent stake in Cheil Industries, the company acquiring Samsung
C&T, which in turn owned a 4 percent stake in Samsung Electronics, the
group’s crown jewel. The merger would solidify and simplify Jay Lee’s
control of Samsung Electronics through this shareholding web, starting with
Cheil on the top.
That, in effect, would raise his stake in Samsung’s empire. Not only
would he rise closer to the throne as chairman of the Samsung empire, but
it would help him pay his inheritance tax.
In fifty-two days shareholders were slated to convene for the vote.
Manhattan investors were livid.
“The attempt by the boards of Samsung C&T and Cheil Industries to
force through this unlawful takeover proposal,” hedge fund Elliott
Management announced in its opening salvo, “represents an effort to divert,
without any compensation, more than 58% (equivalent to approximately
KRW7.85 trillion) of Samsung C&T’s net assets out of the hands of the
shareholders of Samsung C&T and into the hands of Cheil Industries’
shareholders.”
The hedge fund was determined to “fight against charlatans who refuse
to play by the market’s rules,” as its founder, Paul Singer, once said.
Elliott Management controlled $27 billion in assets and was a sizable
shareholder in Samsung C&T. It was not an institution to be trifled with. It
was known for its hard-fighting style and culture of paranoia, and its
founder, Paul Singer, was an ex-attorney and New York investor, a
hardened financial fighter unafraid to confront the world’s most powerful
companies and even some governments. Bloomberg called Singer “The
World’s Most Feared Investor.”
Elliott needed to convince Samsung shareholders to go up against their
nation’s economic pillar. And he had influential backers.
“Vote AGAINST the transaction,” warned Institutional Shareholder
Services, the proxy advisory firm with enormous credibility in shareholder
circles.
On June 3 Elliott bought a 2.17 percent stake in Samsung C&T that
allowed it to up its voting rights, raising its total stake to 7.12 percent and
making it the third-largest shareholder. It signaled that the financial war