Samsung C&T shareholders lose damages suit over 2015 merger

Samsung C&T shareholders have lost a damages suit claiming the company’s 2015 merger with Cheil Industries was pushed through unfairly to secure Samsung Electronics Executive Chairman Lee Jae-yong’s succession.

The 26 individual shareholders had sued Samsung C&T, its management at the time and Lee. The Seoul Central District Court dismissed all of their claims on Thursday.

The court found it hard to conclude that the merger was pursued solely to strengthen Lee’s control over Samsung, and it found nothing unlawful in how the merger ratio was set.

“The merger ratio in this case was calculated on the basis of share value under the Financial Investment Services and Capital Markets Act, after an assessment by an outside specialist institution,” the court said. “No particular circumstances were found to suggest that the share price was deliberately manipulated or that acts prohibited by law were involved.”

In the court’s view, a gap between the two companies in asset size and corporate value does not by itself make the merger unfair.

The court saw no evidence that Samsung C&T’s directors rubber-stamped the merger or that the National Pension Service, a major Samsung C&T shareholder, voted for it on improper instructions.

“Samsung C&T’s directors approved the merger for the company’s business interests after fully reviewing its financial situation and the benefits the merger would bring,” the court said. “No conflict of interest arose in this process, and they cannot be seen to have breached their duty of care or duty of loyalty.”

The plaintiffs’ claim that the merger violated the principle of shareholder equality also failed. Samsung C&T and Cheil Industries were separate companies before the merger, the court said, so treating their shareholders differently does not in itself breach that principle.

Samsung C&T and Cheil Industries agreed to merge in May 2015 at a ratio that exchanged roughly three Samsung C&T shares for one Cheil Industries share. The deal passed at an extraordinary shareholder meeting in July that year, and the merger was completed on Sept. 1 that year, with the combined company keeping the Samsung C&T name.

The plaintiffs received about 0.35 common shares of the merged Samsung C&T for each share of the old company. They have either held on to those shares or sold them since.

The shareholders argued that the merger had been carried out unfairly to ensure a stable transfer of management control to Lee. They sued in 2020 for a total of about 200 million won ($149,500) in damages. The court found that no unlawful act in the merger process had been proven that would make the defendants liable.

Lee also stood trial on criminal charges over the merger, including stock price manipulation, but the Supreme Court finalized his acquittal in July last year.

BY HAN YOUNG-HYE [[email protected]]