Seoul: Locked in a battle with an activist US hedge fund, the Samsung Group`s de facto holding company sought to win support for a proposed $8 billion merger with a sister firm by pledging to bolster post-deal shareholder returns.
Cheil Industries said on Tuesday that the company formed on completion of its all-stock takeover of Samsung C&T Corp would gradually increase its dividend payout ratio to 30 percent by 2020 from the equivalent of 21 percent in 2014 and also consider future share buybacks.
On a forecast 2020 pre-tax profit of 4 trillion won, the dividends would amount to 4,800 won ($4.29) per share, Cheil said in a statement. It also promised a governance committee within the board of directors to guard investor interests.
"The steps show that the companies are mindful of shareholder value, but we need to take a closer look at the details and whether the growth strategy set forth is reasonable," said Baik Jae-yer, fund manager at Korea Investment Trust Management, a Samsung C&T investor.
The investment firm has yet to decide how it will vote at a July 17 shareholders` meeting, he said.
A deal would smoothen a leadership transfer for Samsung`s founding Lee family by helping to consolidate stakes in key companies including Samsung Electronics Co Ltd into a vehicle firmly controlled by the Lee heirs.
ELLIOTT`S CHALLENGE
The Samsung Group is trying to fend off a challenge from Samsung C&T shareholder Elliott, a hedge fund that has filed two injunction requests with a South Korean court to block the merger, which it says undervalues C&T. The court may issue rulings on both requests on Wednesday.
In a rare case of shareholder activism in a country that has long been wary of foreign investors, Elliott has repeatedly criticised the deal and called on investors to vote against Cheil`s offer.
Elliott declined on Tuesday to comment on Cheil`s proposed steps.
Investors in Samsung C&T including overseas fund firms Aberdeen Asset Management and APG Asset Management, and South Korea`s Ilsung Pharmaceutical Co, have also spoken out against the deal, while some domestic investors such as Shinyoung Asset Management have voiced support.
Cheil co-Chief Executive Yoon Joo-hwa told analysts during a briefing on Tuesday that if the current offer fails, the firm will not try again to merge with Samsung C&T.
C&T, separately, sent a letter to shareholders on Tuesday urging them to accept the deal: "We caution our shareholders to be wary of Elliott’s questionable motives," it said.