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Samsung launches charm offensive as proxy vote looms in $8 billion merger battle

A worker works on a Samsung outdoor advertisement installed atop an office building in central Seoul March 23, 2015.

Reuters/Kim Hong-Ji/Files

SEOUL With four days to go in a landmark proxy battle, a Samsung firm is going all out to coax a legion of undeclared investors into backing an $8 billion merger with a sister company that is key to the future of the country’s biggest family-run conglomerate.

Holders of nearly one-third of Samsung C&T Corp shares are believed to support the plan, while the votes of more than half are not publicly known ahead of a ballot at a July 17 shareholders meeting. The deal needs the backing of two-thirds of votes cast at the meeting to pass.

The construction firm on Monday launched a media blitz, with front-page ads in domestic papers seeking support after weeks of courtship of retail and institutional investors. An owner of 3,000 shares told Reuters he was visited three times last week by a C&T representative, who on one occasion bore walnut cakes in keeping with local gift customs.

“Even a single vote entrusted to us would be of great help,” said sober ads stretched across scores of the country’s front pages under the headline, “We earnestly beseech Samsung C&T shareholders”. Ads are set to air on TV channels from Tuesday.

Approval of a merger with Cheil Industries, Samsung’s de facto holding company, would tighten the Lee family’s grip on the group and ease generational succession. Samsung’s 73-year-old patriarch Lee Kun-hee has been hospitalised since a heart attack last year.

Activist U.S. hedge fund Elliott Associates, which says terms of the Cheil offer undervalue C&T, has mounted a vocal campaign opposing the deal, stretching to Seoul’s courts.

Regardless of the outcome in a rare case of shareholder activism in South Korea, the battle is expected to influence how the country’s family-run conglomerates, known as ‘chaebol’, conduct business in a country where they have long held sway.

In what would be a big boost for a deal affording the Lee family more control over flagship Samsung Electronics Co Ltd, domestic media reports over the weekend said the country’s National Pension Service (NPS) would vote its 11.2 percent stake in favour of the merger.

The NPS, C&T’s biggest investor, has declined to comment.

Led by Elliott with a 7.12 percent stake, publicly known opposition stands at about 9.5 percent. Elliott said late on Sunday it has received “a very significant” number of proxy votes against the merger from retail shareholders.

Meanwhile, a C&T spokesman said dozens of employees have visited retail investors recently to enlist support.

IBK Securities analyst Kim Jang-won said NPS support would make Samsung C&T’s job easier, but it can’t afford to relax. “They need to work hard and keep collecting votes through the week, keep making their public relations pitches and win over shareholders.”

(Additional reporting by Sohee Kim and John Tilak; Editing by Tony Munroe and Kenneth Maxwell)

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