In a detailed proposal, Elliott Management laid out a strategy for streamlining Samsung, splitting the company in two/AFP-File
SEOUL, South Korea, Oct 6 – Samsung Electronics responded warily Thursday to a plan submitted by the US activist hedge fund Elliott Management for splitting the South Korean electronics giant into a separate holding and operating company.
“We will carefully review the shareholders’ proposals,” the technology conglomerate said in a terse one-line statement, with its spokesmen declining any further comment.
Entities controlled by Elliott, the hedge fund run by billionaire Paul Singer, own about 0.62 percent of Samsung.
In a detailed proposal unveiled on Wednesday, Elliott laid out a strategy for streamlining Samsung, splitting the company in two, dual-listing the resulting operating company on a US exchange and paying shareholders a special dividend of 30 trillion won ($27 billion).
Elliott argued that Samsung, currently a maze of listed and unlisted companies with a notoriously opaque ownership and management structure, had suffered from a long-term undervaluation in the equity market.
Samsung shares surged as much as 5.0 percent in morning trade on the South Korean stock exchange.
Elliott’s proposal comes at a sensitive time for Samsung, which is in the middle of a leadership succession and struggling with an unprecedented global recall of some 2.5 million Galaxy Note 7s after the smartphones were found to have faulty batteries.
The letter reignites a clash between the family-run conglomerate and Elliott, which unsuccessfully sought to block a merger of two Samsung affiliates last year.
Elliott had challenged Samsung’s plan to have construction firm Samsung C&T taken over by the group’s de facto holding company, Cheil Industries, saying the move willfully undervalued the C&T share price.
Samsung insisted the plan was critical to its current strategy of streamlining and consolidating its group holdings into fewer, larger companies.
Although Elliott lost the bitterly contested battle, the campaign was seen as a watershed moment for shareholder activism in South Korea, where family-run conglomerates, or “chaebols”, dominate the economy and are used to running their businesses with minimum investor interference.
In an unprecedented show of domestic investor power, more than 3,000 individual shareholders had grouped together in an online forum aimed at blocking the C&T takeover.
