Korea Investment Corp, South Korea’s sovereign wealth fund, has requested Elliott Management Corp stop investing in Korea-based businesses following Elliott’s losing proxy fight involving Samsung’s controlling Lee family.
Last month, Samsung C&T shareholders handed the Lee family heir apparent Lee Jae-young a victory in his quest for tightening control over the conglomerate’s crown jewel, Samsung Electronics Co.
Elliott lost proxy fight with Samsung
As outlined by ValueWalk, last month Samsung Electronics Co Ltd’s controlling Lee family managed to convince shareholders to approve an $8 billion merger of two Samsung affiliates that will solidify family heir Lee Jay-young’s grip on prized Samsung Electronics Co. The merger proposal was passed only by a small margin.
In the run up to the shareholder vote on July 17, Elliott campaigned fiercely against the deal, arguing the merger would only benefit shareholders of Cheil Industries, in particular the Lee family.
However, following the shareholders approving the merger, Elliott Associates LP asked Samsung Electronics C&T Corp to buy back the bulk of its shares. South Korean law gives shareholders the right to sell back shares they held before a merger’s announcement if they vote against the deal.
Following the recent developments, Korea Investment Corporation (KIC) has reportedly made a request to Elliott Management to stop investing in Korea. Citing people familiar with the developments, The Wall Street Journal reports that the KIC made the request in accordance with the Korean law that permits KIC to only invest in non-Korean businesses.
The Korea Investment Corporation Act, 2005 mandated creation of the sovereign fund to invest in overseas assets. KIC now has assets worth over $85 billion.
KIC has invested in Elliott
The sovereign fund is concerned about the risk of bad publicity by being associated with unwelcome overtures for Korean interests.
Interestingly, as detailed by ValueWalk, before the shareholder approval of the $8 billion merger of two Samsung affiliates, KIC indicated that it might pull its investment in Paul Singer’s Elliott Management if Elliott continues to act against the national interests of Korea.
KIC invested $50 million in Elliott in October 2010 and has seen its stake appreciate by roughly 40%. The sovereign fund also had the option of investing additional capital in Elliott.
The latest request from the sovereign wealth fund reflects a delicate balance that some sovereign funds must manage as state-controlled investment vehicles can be impacted by domestic political needs that are sometimes at odds with economic objectives.
Michael Maduell, president of independent research firm Sovereign Wealth Fund Institute, said: “There is a fine balance between jumping on the opportunity [of investing in activist managers] while respecting political sensitivities”.
The post Korean Sovereign Fund Asks Elliott To Refrain From Investing In Korea appeared first on ValueWalk.
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