Elliott Associates, a big US hedge fund, lost a shareholder proxy battle against the Samsung Group last year as it sought to restructure the conglomerate. It lost against Samsung’s founding Lee family after a long and bitter public shareholder proxy war which lasted for several months, however, Samsung management said it would follow through on some of the governance measures suggested by the hedge fund. It’s now gunning for major changes at Samsung Electronics, saying that the company should be split up and listed on the Nasdaq with shareholders being handed a special dividend payout. The hedge fund has sent a letter to Samsung’s board of governors arguing that the world’s largest smartphone vendor has “failed for years to deliver proper shareholder value.”
Elliott Associates believes that Samsung is undervalued by as much as 70 percent due to the company’s “unnecessarily complex” corporate structure as well as “bottom-tier” shareholder returns and “subpar” governance. The hedge fund has called on Samsung to split the company which it controls via a complicated web of affiliate companies and cross-shareholdings, and to list the main operating company on the Nasdaq in the United States. Elliott has also called on Samsung to establish a more independent board that’s more gender diverse and proposed a special cash dividend of $27 billion to shareholders. In case you’re wondering how can this hedge fund call on Samsung to take all of these steps, it’s because its affiliates Blake Capital and Potter Capital own 0.62 percent of Samsung Electronics combined.
Samsung has taken some serious steps to restructure its business over the past year as heir apparent Lee Jae-yong prepares to take his father’s place as chairman of the conglomerate. His father, the current chairman, was left bedridden by a heart attack back in May 2014. It embarked on a $10 billion share buyback program to create more value for shareholders and also increased dividend payouts. The company has been selling some of its business interests as well to focus more on its core businesses of mobile, appliances, and display. Samsung has not officially commented on this yet and there’s no guarantee that Elliott will fare better this time around in its battle with the South Korean conglomerate.
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