Whitebox Advisors joined Britain’s Palliser Capital and City of London Investment Management (CLIM) in asking Samsung C&T to enhance shareholder value ahead of its annual general meeting of shareholders next year, the U.S. hedge fund manager said Thursday.
As a shareholder with a 0.5 percent stake in Samsung C&T, Whitebox called for an increase in shareholder returns, a clear capital allocation framework and a transparent executive compensation structure, in a letter sent to the Korean firm’s board of directors last month.
The letter was disclosed after Palliser, which holds a 0.62 percent stake in Samsung’s construction, trading, fashion and resort affiliate, called for a holding company structure and CLIM sent a letter requesting larger dividends and an immediate share buyback program.
“We are writing to share our recommendations for addressing the company’s 68 percent trading discount to the value of its underlying assets, which is depriving minority shareholders the benefit of Samsung C&T’s high-quality businesses,” Whitebox said. “If the board does not meaningfully engage with us on our recommendations to enhance shareholder value at Samsung C&T, we intend to share our views with our fellow shareholders in due course.”
Whitebox is led by Simon Waxley, who previously worked for Elliott Management, another U.S. activist fund that had opposed a 2015 merger between Samsung C&T and Cheil Industries, which was apparently intended for Samsung Electronics Executive Chairman Lee Jae-yong to inherit control of the group from his father. Palliser was also founded by James Smith, who previously led Elliott’s campaign against the merger.
There is speculation that the former Elliott employees may have learned from how their former employer was able to make huge profits by attacking the Seoul-based Korean company.
In June, the Permanent Court of Arbitration in the Netherlands ordered the Korean government to pay Elliott $53.59 million in addition to interest in arrears and legal fees, as the court saw that the National Pension Service’s approval of the merger had caused losses for Samsung C&T shareholders.
Elliott received another 65.9 billion won ($50 million) from Samsung C&T in May last year because the Korean firm agreed to the U.S. firm’s request to acquire its stake for 66,602 won per share, instead of the 57,234 won per share that Samsung had initially offered to shareholders who complained about the share swap ratio for the merger.
However, securities analysts did not expect Whitebox, Palliser and CLIM to pressure Samsung C&T to accept their requests, because they have only small amounts of shares unlike Elliott, which had held a 7.12 percent stake in the Korean firm. In 2021, Whitebox failed to prevent LX Group from spinning off of LG Group, despite support from major proxy advisers.
“The activist funds seem to be expecting Samsung C&T to enhance shareholder value, once the court rules in January on the Samsung chairman’s conspiracy allegations in the merger,” Hi Investment & Securities analyst Lee Sang-heon said. “The company is unlikely to launch a holding firm or increase dividends significantly, but it is expected to speed up its planned share buyback and retirement of treasury stocks.”
In response to the shareholder activism, Samsung C&T said its board members will review the proposals, once its business performance for this year is finalized. Whitebox claimed that Yi Sang-seung, an outside director of Samsung C&T, said he found its analysis and recommendations compelling given the Korean firm’s current discount to net asset value.
