US hedge fund Elliott Associates is targeting to block the merger between two key affiliates of South Korean conglomerate Samsung, as the fund criticised the deal as unfair.
Construction company Samsung C&T earlier 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. The group's chairman Lee Kun-hee has been bedridden following a heart attack in May 2014.
The proposed merger "significantly undervalues Samsung C&T and ... the terms are neither fair to nor in the best interests of Samsung C&T's shareholders", according to Elliott, which currently has a 7.1% stake in the construction company.
Elliott's opposition is likely to increase pressure on Cheil Industries to increase its offer for Samsung C&T. Following criticism from the hedge fund, Samsung C&T shares jumped as much as 13% in South Korea.
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.
Jay Y Lee and members of his family directly own 42% of Cheil Industries, while Samsung affiliate companies own about 30% of the company.
Nevertheless, 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.