Daily Management Review

Fate Of $8 billion Samsung Merger Hangs On Advertisement Blitz Outcome


Fate Of $8 billion Samsung Merger Hangs On Advertisement Blitz Outcome
Barely days before a crucial share holders meeting, Samsung C&T Corp, the sister company of Samsung engaged in construction business, has resorted to advertisements in leading news papers in South Korea. The aim is coax as many of the shareholders as possible to garner support to back an $8 billion merger with a sister company. The merger is important for the future plans and expansion of the one of the largest family run businesses in the world.
The verdict of the shareholders would be known of July 17 via a secret ballot. Sources claim that nearly one third of the shareholders of the company are in favour of the merger. However the views of more than half of the shareholders are not known publicly. Sources say that such shareholders could vote either way. at least two thirds of the shareholders need to agree and show support for the merger to allow it to happen.
While representatives of the company are reported to be constant touch with important shareholders, meeting them and trying to win them over in favour of the merger, the company is taking no chances.  
The company has resorted to holding an emotional appeal to its shareholders through a media blitz. The campaign had front page advertisements in a large number of domestic newspapers in South Korea. The advertisements made an emotional appeal to retail and institutional investors after seeking their support through personal contacts over the last few weeks. Sources said that large retail shareholders are being personally approached. According to Reuters, one such shareholder claimed a company official turned up at his house with a box of walnut cakes in keeping with local gift customs.
The advertisements emotional appeals read: “Even a single vote entrusted to us would be of great help”. Such appeals were made throughout the country on the front pages of more a dozen domestic newspapers. Analysts say that such a corporate advertisement blitz had not been witnessed in recent times in South Korea. Some even went to say that such a campaign was uncommon in the Asian business scenario.
The move by Samsung C&T Corp is seen as a step that the Lee family wants to take to tighten its grip over the group of companies. Samsung C&T Corp wants to merge with Cheil Industries, a de facto holding company of Samsung. The merger would also reportedly ease out the generational succession issues presently plaguing the global company. Lee Kun-hee, the 73-year-old patriarch of Samsung, has been hospitalized since a heart attack last year and the company is trying to establish a possible heir to head the family business.
However there has some visible opposition to the proposed merger. Opposition by activist U.S. hedge fund Elliott Associates has gone to the courts after the funding agency claimed that the merger would essentially devalue Samsung C&T Corp.
There have been reports that National Pension Service (NPS) that has 11.2 percent stake in the company would vote in favor of the merger. However there has been no comments from National Pension Service.
On the other hand, reports say that 9.5 percent stake holders, Led by Elliott with a 7.12 percent stake, are opposing the merger. This has prompted the company to make the emotional appeal to retail and institutional stakeholders to support the merger.