“Samsung C&T merger, proceeding legally… Shareholder profits-positive effect of management improvement”

Amid the allegations of a merger between Samsung C&T and Cheil Industries held in 2015 and the related trial resumed after five months, the defense attorneys of Samsung argued that it was a legitimate business activity and all procedures were carried out legally.

On the contrary, after the merger, Samsung C&T faced the prosecution’s claim that no company has suffered losses such as improvement in management, but rather made profits.

Part 25-2 of the Seoul Central District Court Criminal Agreement held a second trial date for the Samsung C&T merger and bio-accounting allegations in Seoul Central District Court at 2 pm on the 11th.

On this day, the lawyers used a presentation (PPT) file to focus on the fact that the merger process between Cheil Industries and Samsung C&T was normal and claimed innocence. This case is a suspicion that the accounting books were manipulated at the time of the merger between Cheil Industries and Samsung C&T in September 2015. It is said that the Samsung Group made the merger ratio between Cheil Industries and Samsung C&T favored Cheil Industries by raising the stock price of Cheil Industries by appraising Samsung Bio’s company value higher than it actually is.

The calculated merger ratio between Cheil Industries and Samsung C&T was 1:0.35. This ratio was determined as the weighted average of each company’s market capitalization for one month prior to the resolution date of the board of directors as stipulated by the Capital Markets Act, but the prosecution is raising suspicion.

First of all, the lawyers mentioned the various circumstances surrounding Samsung C&T at the time and mentioned that it was necessary for business. In the case of Samsung C&T, the merger proceeded with regulatory changes such as circular investment due to changes in government policy amid the continuing recession in the construction industry and enormous losses from overseas projects.

Rather, it was pointed out that after the merger, Samsung C&T’s management performance and credit rating increased, which was positive. In particular, he pointed out that the prosecution’s argument that only Samsung C&T’s stock price was deliberately undervalued was contradictory in a situation where all the stock prices of the construction industry were falling.

The lawyers said, “Samsung C&T has suffered more than 3 trillion in insolvency due to the loss of overseas projects, and Samsung Engineering has been insolvent,” he said. “Institutional investors, including the National Pension Service, sold shares of Samsung C&T before the merger. If it is expected to rise, institutional investors do not need to sell net.”

“There is an expression in the public notice that Cheil Industries is overvalued and Samsung C&T is undervalued. To what extent is it dominant?” Why would you have bought it?”

Accordingly, he explained that the merger ratio was determined according to the stock price of each company for a month before the resolution date of the board of directors as stipulated by the Capital Markets Act.

The lawyers said, “The purpose of setting the merger ratio as the stock price is to secure objectivity through the stock price, because if the ratio is set through negotiations between the two companies, or if it is determined through valuation at that time, there will be controversy whether it is truly fair.” He said, “The allegations that the stock price has been manipulated are not included in the prosecution facts, but are only raising suspicions. In the end, it seems that it was revealed that it was not intentionally manipulated even in the prosecution’s long-term investigation,” he said.

Along with this, the lawyers argued that it was difficult to believe that the merger caused damages to the company and shareholders in relation to the alleged negligence in business.

The lawyers said, “The board of directors of Samsung C&T decided to merge after sufficiently reviewing the business feasibility.” .

“The investigation of this case has been conducted over the years, with dozens of seizure and search, and more than 400 summons of executives and employees of subsidiaries, and more than 800 summons of all summons.” In the related administrative case, a decision was made to suspend execution of the disposition, etc.,” he added.