Aggressive American Hedge Fund Head Hunts Samsung “Demerger”
The $27 billion fund is commonly known as one of the world’s most aggressive activist investors and they are now somewhat insistent that South Korean tech giant Samsung Electronics to break up into separate companies. This escalates the pressure put on the company after battling with a subsidiary of Samsung, last year.
In a letter to Samsung’s board, on Wednesday, Elliott Management also said that this new holding company should then look at the potential for an all-stock merger with said subsidiary—Samsung C&T Corp. The New York hedge fund had been targeting them in a very intense shareholder battle only a year ago. Samsung C&T, of course, is the defacto holding firm of all of the Samsung Group.
“We see this as a defining moment and a tremendous opportunity for the forthcoming new leadership of Samsung Electronics to further advance the company’s remarkable legacy,” the hedge fund explains.
While Samsung Electronics was not immediately available for comment on the advisory, Samsung C&T shareholders voted in favor of this all-stock takeover offer—from last July, from Cheil Industries, Inc—a deal which Elliott had not only opposed earlier, but also fought very hard to make disappear.
Elliott goes on to say that this company trades at a major discount when compared against its international competition, partly due to “an unnecessarily complex Samsung group structure,” but also because the potential for restructuring continues to lend to uncertainty.
Still, the hedge fund argues that Samsung needs to reduce its excess cash reserves, calling also for a special dividend of 245,000 won—approximately $224—per share, of Samsung Electronics. That is approximately $27 billion USD worth of payouts. Also, the plan proposes at least 75 percent of the new operating company’s cash flow to be distributed as dividends henceforth. However, the new holding could potentially remain available for trading on the Korean stock exchange, though Elliott also would like to be able to list the company on the NASDAQ market as well, in order to get more visibility of the newly structured business.
Keep in mind, too, that the Elliott Management Hedge Fund only owns about 0.62 percent of Samsung Electronics.