Hedge fund makes fresh legal challenge to Samsung Group deal

A man walks at the Samsung Electronics' headquarters in Seoul January 7, 2015.

/Kim Hong-Ji

U.S. activist hedge fund Elliott filed another injunction to block a proposed $8 billion merger of two key Samsung Group companies, escalating a conflict over a deal seen key to leadership transfer at South Korea's top conglomerate. Elliott said it had filed its second injunction with a South Korean court, this time to stop Samsung C&T Corp from selling treasury shares to KCC Corp in a bid to gain KCC's support for the proposed all-share takeover offer from Cheil Industries Inc.The U.S. fund, which last week emerged as the third largest shareholder in Samsung C&T, believes the merger undervalues Samsung C&T and is already challenging the deal in court.Such investor activism is rare in South Korea and could galvanize more opposition to the deal from smaller shareholders, analysts say. Both Samsung C&T and Cheil are Samsung Group affiliates and the merger would allow the conglomerate's controlling Lee family to consolidate its holdings ahead of an eventual power transfer since patriarch Lee Kun-hee, 73, fell ill a year ago. He remains hospitalized.On Thursday, Samsung C&T said it would sell treasury shares equivalent to a 5.8 percent stake to KCC, which is also a major shareholder in Cheil, to secure its backing for the deal. Samsung C&T and KCC separately told they were checking the details of Elliott's injunction request. The companies declined to comment further. Samsung C&T shares were down 4.8 percent as of 2122 ET, underperforming a 0.3 percent rise for the broader market. (Reporting by Se Young Lee; additional reporting by Sohee Kim; Editing by Miral Fahmy)