Elliott v. Samsung C&T : Evaluating Challenges to the Legality and Fairness of the Samsung C&T–Cheil Industries Merger

On 26 May 2015, Samsung C&T and Cheil Industries entered into a contract whereby Cheil Industries would merge with Samsung C&T. After which, on 11 June 2015, Samsung C&T sold all of its treasury stocks to KCC Corporation at a price of 75,000 won per share. To prevent Samsung C&T's merger transaction and treasury stock disposal, the American hedge fund Elliott Management filed two injunctions claiming that the merger and Samsung C&T's treasury stocks disposal should be considered null for several reasons. However, the Seoul Central District Court rejected the two injunction petitions. In Korea, merger and acquisition lawsuits are very rare, as are related judicial decisions and academic studies. Moreover, existing studies focus primarily on introducing American judicial decisions and theories. This article aims to examine and review three important legal issues: the priority order between Article 402 and Article 542-6 of the Korean Commercial Act; fairness of a merger ratio and consequences of unfairness; and whether a company disposing of treasury stocks must observe the provisions pertaining to the issuance of new stocks for existing shareholders, specifically regarding Elliott’s claims and the Seoul Central District Court’s decisions in the above-referenced injunction cases. Through critically reviewing the existing academic theories and judicial decisions regarding these issues, this paper emphasises my personal and what I consider to be reasonable interpretation of the laws related to these issues. These opinions are based on the perspectives of legislative as well as legal interpretation.