Samsung targeted by Elliott Management to restructure

SEOUL (BLOOMBERG) - Samsung Electronics is being urged by activist investor Elliott Management to restructure a business that spans Galaxy smartphones, televisions, semiconductors, screen displays and other consumer electronics.

In a 10-page letter and 31-slide deck released publicly and to Samsung's board on Wednesday, affiliates of Elliott - Blake Capital and Potter Capital - called on the company to streamline and break into two, pay shareholders a dividend of 30 trillion Korean won (S$36.9 billion), dual-list its operating company on the Nasdaq, and add three independent board members.

The proposal comes at a critical time for the South Korean electronics conglomerate. The company has been operating without longtime Chairman Lee Kun-Hee, who has been hospitalized, while also trying to navigate the aftermath of the troubled launch of its latest Galaxy Note smartphones, which had to be recalled after batteries were bursting into flames.

Entities controlled by Elliott, the hedge fund run by billionaire Paul Singer, own about 0.62 per cent of Samsung.

It's not Elliott's first foray into Korean corporate governance. Last year, Singer's Elliott Associates started a proxy fight to contest the proposed merger of two of Samsung's units, in which the Lee family's Cheil Industries, Samsung's de facto holding company, bid to acquire Samsung C&T, a publicly traded construction company that owned more than US$10 billion in shares of Samsung Electronics and other Samsung Group companies.

In that battle, Samsung narrowly defeated Singer when Samsung C&T investors accepted an all-stock buyout from Cheil.

Elliott's proposals "will deliver better capital returns, better corporate governance, and enhanced shareholder value, for all Samsung Electronics' shareholders - whilst simplifying, and retaining the founding family's controlling interest in, the current Samsung group corporate structure, for the benefit of all stakeholders," the activist wrote in the letter.

The hedge fund often targets technology companies and prods for strategic deals. CDK Global reached a settlement with Elliott in August, agreeing to add two independent directors to its board, and Citrix Systems, which added Elliott's US activism head Jesse Cohn to its board last year, is merging its GoTo business with LogMeIn Inc.

Elliott has been one of the busiest activist investors in recent years, but hasn't launched a proxy battle since Hess Corp. in 2013. The firm pushed for an overhaul at EMC Corp, which soon agreed to be acquired by Dell Technologies in a deal completed last month.