Korea’s national pension fund may outsource verdict on Samsung merger plan

South Korea’s national pension fund, which holds what could be the swing shareholder vote in Samsung Group’s contentious US$8 billion merger plan, may outsource its decision to an external panel, sources say.

The National Pension Service (NPS) is the largest investor in South Korean stocks. It has substantial stakes in companies including Samsung C&T - the battleground between the powerful Samsung Group and US hedge fund Elliott.

Elliott, in a rare case of shareholder activism in a country long wary of foreign funds, is trying to block the sale of Samsung C&T to sister firm Cheil Industries, the de facto holding company of Samsung Group. Elliott says Cheil’s offer undervalues C&T, in which the fund has a 7.1 per cent share.

Samsung C&T shareholders friendly to the takeover hold a combined 20 per cent stake in the construction firm. The deal needs the support of least two-thirds of votes at a shareholder meeting on July 17. NPS owns a 10.2 stake, so its vote could sink or seal a deal key to ensuring a stable leadership transfer in Samsung’s founding Lee family.

NPS, the world’s third-largest pension fund with $444 billion in assets, is mandated to vote against decisions that could damage shareholder value. When a case is less clear, which may apply in the Samsung deal, it calls on an external nine-member committee consisting of academics, think-tank researchers and a lawyer.

"Looking at shareholder value, it’s about whether there will be a synergy effect through the merger," said a committee member, declining to be identified because he was not authorised to speak with the media.

"Samsung says there is a synergy effect but doesn’t say what kind and how much. There is some inadequacy in explanation."