Activist pressure sends Samsung C&T shares soaring

Shares of Samsung C&T have gained momentum, propelled by activist funds urging Korea's construction and fashion company to rectify a discount in its share price.

Samsung C&T headquarters in eastern Seoul [NEWS1]

Shares of Samsung C&T have gained momentum, propelled by activist funds urging Korea's construction and fashion company to rectify a discount in its share price.

Samsung C&T shares closed at 134,000 won ($103) on Thursday up by 4.12 percent compared to the previous day.

That resulted in a nearly 30 percent gain from the end of October when the shares traded at as low as 103,600 won. U.S. activist fund Whitebox Advisors, which owns some $100 million stake in Samsung C&T, on Wednesday disclosed a letter sent to the company board in November, urging it to address the share price, which the fund believes is 68 percent lower compared to the company's net asset value.

"We are writing to share our recommendations for addressing the company's 68 percent trading discount to the value of its underlying assets, which is depriving minority shareholders of the benefits of Samsung C&T's high-quality businesses," the letter said.

The activist fund requested the company increase shareholder returns by reallocating cash and adopting a more transparent capital allocation framework.

It also requested that the company adopt an executive compensation structure that aligns with the minority shareholders.

"We believe that Samsung C&T's opaque executive compensation model should be adjusted to align executive incentives with shareholders' interests," it said in the letter. "There are no details regarding the criteria that determine the level of executive compensation."

Whitebox Advisors said it has been investing in Samsung C&T since 2017 and is holding onto 0.5 percent of its outstanding common shares.

The fund's actions come after two other hedge funds publicly pressured Samsung C&T to improve its management structure.

Earlier this month, British activist fund Palliser Capital said there is a $25 billion disparity between the share price and the company's "intrinsic market value," which translates to a 63 percent discount in share prices.

Another British fund, City of London Investment Management, also asked Samsung C&T for a dividend payment of 4,500 won per share and to roll out a share buyback program worth 500 billion won through 2024.

Samsung C&T, which has operations spanning from construction to fashion, is considered a de facto holding company of Samsung companies as Lee Jae-yong, executive chairman of Samsung, holds a vast amount of its shares.

Lee owns 18.1 percent of the company as of the end of the third quarter of this year.

"The company continues to listen to various opinions from shareholders and strives to elevate corporate value," Samsung C&T said in a statement Thursday.

Samsung C&T is scheduled to hold a general meeting in March 2024.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]