South Korea's strengthened fair trade act, now pending in the National Assembly, may allow Samsung Electronics to fall victim to hostile mergers and acquisitions accrording to an article in Korea Times. This might also impact Korea's top conglomates, who have increseing foreign stock ownership.
The electronics giant's in-house documents pointed out that the revision of the fair trade act might pass control of the nation's flagship firm to foreign shareholders.
The revised law, facing strong protests from chaebol and the main opposition Grand National Party, will reduce the combined voting rights of Samsung affiliates in Samsung Electronics to 15 percent from the current 22 percent.
This means Samsung Electronics will face the possibility of coming under the sway of hostile corporate hunters as the voting rights of the 10 largest foreign shareholders amount to around 22 percent.
``We have learned that the 10 biggest foreign shareholders have frequently contacted each other of late in order to share information on the implication of a revised fair trade act on Samsung Electronics. If a hostile M&A is launched, they are likely to come together and smaller foreign shareholders, hoping to cash in on rise in stock prices, are also expected to join them,'' the document said.
It projected three possible scenarios for a hostile M&A. The first is for the foreign shareholders to appoint someone as chief financial officer and then take control of the board of directors by increasing the number of friendly outside directors.
The second possibility is a proxy war at a shareholders' meeting, while the last is a take-over bid or the gathering of funds to gain a controlling stake in Samsung.
Samsung Group's combined voting rights in Samsung Electronics totaled about 22 percent at the end of last year, including the portion held by group chairman Lee Kun-hee and his family members.
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