Seoul Court Supports Merger for Two Samsung Units
Ben Cho, Oct. 19, 2017, 8:38 a.m.
A Seoul court on Thursday dismissed a local company's lawsuit against Samsung Group's merger of two units in 2005 allegedly aimed at cementing heir Lee Jae-yong's control of the conglomerate despite expected losses to shareholders. Lee was indicted for bribing then-President Park Geun-hye and her confidante in return for the government's support for the amalgamation of Samsung C&T Corp. and Cheil Industries Inc. Lee was sentenced to five years in jail in August and is appealing the decision.
Ilsung Pharmaceutical Co., a then major shareholder of Samsung C&T, lodged the suit early last year, requesting the court to invalidate the merger, saying its term was based on underestimation of the construction and trading company. Ilsung claimed the skewed share exchange ratio inflicted huge losses on Samsung C&T shareholders. Ilsung held a 2.1 percent stake in the company.
The 8.9 trillion won (US$7.85 billion) merger is widely seen as part of a scheme to facilitate Lee's succession of the group from his bedridden father. But the court ruled that the merger is not invalid because inheritance cannot be viewed as the sole purpose of the unification.
It also serves the purpose of realigning the ownership structure for the sake of stable management, the court said. "The reinforcement of a certain person's control is not an act banned by the law. Therefore it cannot be said that the merger's purpose is inappropriate just because it entailed enhanced control," the court said.
The court also found there are no grounds to affirm that the merger ratio was unjust to Samsung C&T shareholders. "The ratio was set in accordance with the Capital Market Act," it said. "Even if it was unfavorable to some shareholders to a certain degree, it cannot be said that it was outstandingly unfair."
Samsung C&T offered shareholders 57,234 won per share at the time of the merger. Ilsung and other shareholders have filed for a separate court settlement over the price, which awaits a Supreme Court decision.