Vote pits Samsung’s founding family against foreign, Korean investors

The takeover is crucial for consolidating a once-in-a-generation leadership shift at Samsung, a vast conglomerate of 67 affiliated companies with smartphone powerhouse Samsung Electronics at its center. The business empire’s ailing patriarch Lee Kun-hee has been hospitalised since May last year and his son Lee Jae-yong is assuming a bigger leadership role but lacks a significant stake in flagship company Samsung Electronics.

The proposed all-stock takeover will give him that stake without having to spend billions of dollars to buy it from other shareholders. But the deal has met unexpected opposition led by US hedge fund Elliott Associates, which owns 7.1 per cent of Samsung C&T and says the terms of the deal undervalue its shareholding.

The outcome of the vote will also influence overseas perceptions of South Korea. The country has long faced criticism that the founding families of its big business groups known as chaebol exercise too much power over companies that have become publicly traded. 

Those concerns about poor governance and weak shareholder rights have resulted in foreign investors marking down the value of South Korean shares. The deal “has economic importance to us, but we think it’s also important for Koreans - the way Korea and Korean corporate governance is perceived in the world,” Paul Singer, founder of Elliott, said in an interview with CNBC. 

In the days leading up to the vote, Samsung C&T has taken out television and front-page newspaper ads asking shareholders to vote for the takeover. It has also mobilized employees to visit shareholders with mango juice and watermelon. Some shareholders voiced complaints on an online forum that Samsung had shared their private information with its employees without consent.

Matters took an ugly turn when business publications used anti-Semitic smears to attack Elliott and its founder. Samsung C&T yesterday removed cartoons it had posted online that depicted Singer as a ravenous big-beaked vulture. 

Meanwhile, Samsung is betting big on the burgeoning demand for 4G-enabled devices and plans to expand its portfolio of LTE smartphones in the coming months. The company on Thursday announced two 4G-enabled smartphones -- Galaxy J5 and Galaxy J7 -- priced at Rs 11,999 and Rs 14,999, respectively.

“Currently, we have 10 LTE smartphones and today, we are adding two more. Going ahead, we will launch more 4G devices across price points,” Samsung India Vice President Marketing (IT and Mobile) Asim Warsi said without disclosing further details.  He added that 4G adoption will happen at a faster pace than 3G in the country and the company is geared up to tap into the opportunity, he added.

Samsung offers 4G handsets priced between Rs 9,000 and Rs above 60,000. “We are a full portfolio player. We will have products across price points,” he said. The new mid-priced range of smartphones will be available on e-commerce platform Flipkart exclusively. Both models can be pre-booked from today till July 22. 

Samsung has also partnered with Airtel to provide an introductory offer for 4G users that will include double data offer. Customers will also get unlimited music download worth Rs 594 through Wynk Music app for six months.