Shareholders: 'Unfair merger caused losses'

Court: 'Cannot find merger ratio was unjust'

Samsung Electronics Chairman Lee Jae-yong leaves Seoul High Court in Seocho-gu after being acquitted in February at the appeals court sentencing hearing on allegations of unfair merger and accounting fraud related to the Samsung group succession. [Yonhap]
Samsung Electronics Chairman Lee Jae-yong leaves Seoul High Court in Seocho-gu after being acquitted in February at the appeals court sentencing hearing on allegations of unfair merger and accounting fraud related to the Samsung group succession. [Yonhap]

Minority shareholders of Samsung C&T have lost a civil lawsuit filed against the company and Samsung Electronics Chairman Lee Jae-yong over the merger with the former Cheil Industries. The first-instance ruling came roughly six years and eight months after the suit was filed.

The 30th Civil Division of the Seoul Central District Court ruled Thursday against the plaintiffs — 25 minority shareholders, including a person identified only as A — dismissing their damages claims against Lee and Samsung C&T. The court also ordered the plaintiffs to bear litigation costs.

The court said Samsung C&T had pursued the merger for purposes including business stabilization, and that it was difficult to conclude the merger's sole aim was to strengthen Lee's control over the group.

The court added that the merger ratio had been calculated based on share valuations under the Capital Markets Act and reviewed by outside assessors, and that no special circumstances were found suggesting the market share price had been manipulated or that prohibited methods had been used. The court further said it could not find that the merger ratio was significantly unfair.

The court also said there were no circumstances indicating Samsung C&T had given only formal approval to the merger or had acted under improper instructions, and that because the purpose of the merger and the process for calculating the ratio were not unlawful, the plaintiffs' claims could not be accepted. It dismissed all claims against Samsung C&T, its directors and Lee.

The legal team representing the shareholders — composed of lawyers affiliated with Minbyun (Lawyers for a Democratic Society) and People's Solidarity for Participatory Democracy — began recruiting minority shareholders who held Samsung C&T stock at the time of the merger in November 2019. The 32 shareholders who joined the suit held, or had held, 0.35 ordinary shares of the merged Samsung C&T issued after the 2015 merger.

They filed the lawsuit in February 2020. At the time, the legal team argued that Samsung C&T should dismiss the six directors who voted in favor of the merger, reconstitute its board and audit committee, and compensate the national pension fund for losses caused by the unfair merger ratio between Samsung C&T and Cheil Industries.

Separately, a first-instance trial is also under way on a damages suit filed by the national pension fund against Lee and Samsung C&T. The fund, which held an 11.21 percent stake in Samsung C&T at the time of the merger, has maintained that it suffered losses because Cheil Industries was valued above market assessments while Samsung C&T was undervalued. The damages claim amounts to about 500 million won ($374,000).

Meanwhile, the Supreme Court acquitted Lee last year in a case in which he had been indicted on allegations of unfair merger and accounting fraud related to the Samsung C&T–Cheil Industries merger and Samsung Biologics' accounting practices. The acquittal came four years and 10 months after the indictment in September 2020.


notstrong@heraldcorp.com