Seoul: Stocks edge up as Samsung Electronics hits record high

A man walks at the Samsung Electronics' headquarters in Seoul

In a 10-page letter publicized on October 5, affiliates of Elliott - Blake Capital and Potter Capital - called on South Korea's largest conglomerate to split its flagship Samsung Electronics into holding and operating companies for organizational and tax benefits and asked it to pay shareholders a special dividend of 30 trillion won (US$27 billion), among other steps. "In Samsung Group's case they have probably wanted to say something like this and now a foreign stakeholder has spoken up".

Elliott's investment comes after Samsung has undertaken a series of moves to pave the way for a stable handover from the ailing, 74-year-old Lee Kun-hee, who runs the group, to his three children. The founding family and management of Samsung Electronics in particular deserve to be applauded for these achievements. But Elliott said the shares are undervalued by as much as 70% because of Samsung Electronics' "bottom-tier" shareholder returns and "subpar" corporate governance.

Last year, Elliot started a proxy fight in an attempt to upset Samsung's merger of is two affiliates, Samsung C&T and Cheil Industries, in which the investment firm narrowly lost.

Samsung did not immediately comment on the report, and Qualcomm could not be immediately reached for comment. The firm did not comment on specifics of Elliott's proposal or whether it has been in communication with the USA activist hedge fund.

"We are supportive of restructuring and a higher dividend payout to unlock the value in the business", Andrew Gillan, head of Asia ex-Japan at Henderson Global Investors, told Reuters in an email on Thursday.

"Now is the time for real shareholder value, corporate governance and transparency improvements, which we believe will help Samsung Electronics achieve an equity market valuation that properly reflects its first-class portfolio of businesses".

Elliott subsequently sold its 7.1% stake in construction company Samsung C&T Corp.

Analysts said Elliott's proposals will likely lead to further pressure from offshore investors for the conglomerate to open up on its plans and make sure their interests are protected in any further restructuring.

Unlike the Samsung C&T battle, where the majority of shareholders were domestic investors, 11 of Samsung Electronic' s top 20 shareholders are worldwide investors, according to Thomson Reuters data. The NPS played a significant role in the Samsung-Elliott spat previous year, its backing for the deal helping to secure its passage.

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