US hedge fund Elliott Associates has said that Samsung Group must adequately reward the shareholders of its affiliate Samsung C&T, while seeking to merge it with another affiliate Cheil Industries.
"Elliott continues to view the terms of the proposed takeover as unfair, unlawful and significantly damaging to the interests of Samsung C&T's shareholders," the fund said in a statement.
"Whilst Elliott understands and is supportive of the need for a restructuring of the Samsung Group in connection with the potential succession of control over it, any transaction proposals which are part of that restructuring must comply with all applicable corporate governance standards and therefore properly recognize the value attributable to Samsung C&T's shareholders."
Elliott Associates, which is the third-largest shareholder in Samsung C&T, has been engaged in a row with the construction company after it agreed to be taken over by Cheil Industries, in which Samsung Electronics vice-chairman and heir apparent Lee Jae-yong is the major shareholder. As per the deal, each Samsung C&T share will be exchanged for 0.35 of a share in Cheil Industries, valuing the acquisition target at more than $8bn (£5.2bn, €7.3bn).
The merger is widely seen as the family's attempt to ensure control of the group, ahead of an expected leadership succession. Samsung group's chairman Lee Kun-hee has been bedridden following a heart attack in May 2014.
Elliott, which recently increased its stake in Samsung C&T to 7.1%, earlier criticised the deal, saying it is not in the best interest of Samsung C&T shareholders. It also said it commenced legal proceedings for an injunction to seek to prevent the takeover.
The deal is subject to the approval of shareholders in both the companies. They will vote on the proposal on 17 July, and a two-thirds majority is required to approve the deal.
The Lee family owns just 1.4% of Samsung C&T, and the total holding will be less than 20%, if shares of affiliates and related parties are taken into account, according to brokerage CLSA.
Reuters earlier reported that some local investors in South Korea are supporting Elliott's move to block the merger.