Investor Targets S. Korea Over $8B Samsung Affiliate Tie-Up

Joanna Estrada
May 4, 2018

South Korea's financial regulator, said on Tuesday it had given preliminary notice to Samsung BioLogics and its auditors of measures it could take concerning the suspected breach.

Shares in the $30 billion company, an affiliate of technology giant Samsung Electronics Co Ltd 005930.KS , plunged nearly 20 percent amid suspicion it breached accounting rules to inflate its net profit before its 2016 listing.

Samsung BioLogics said in a regulatory filing on Wednesday that it would prove its books were sound.

"If a decision is made that we can not accept, we plan to file an administrative lawsuit", BioLogics' Vice-President Byunghwa Shim told reporters.

A USA -based activist investor said Tuesday that it is bringing South Korea to arbitration over that country's decision to back the $8 billion merger of two Samsung affiliates in 2015, claiming the move cost it unsaid financial damages. In 2015, Elliott filed for an injunction against the merger between Samsung C&T and Cheil Industries, ... claiming the merger was created to cement a power transfer to Samsung Group's heir apparent Lee Jae-yong.

But its shares fell as much as 19.8 percent to their lowest since late January, before paring losses to trade down 14.5 percent. It was their biggest intra-day drop since listing in late 2016.

The benchmark Korea Composite Stock Price Index had fallen 9.47 points, or 0.38 percent, to 2,505.91 as of 11:21 a.m. A year earlier it had posted a roughly 28 billion won net loss.

Elliott Management on May 3 expressed disappointment and questioned why the Korean prosecution chose to revive a dormant probe and has summoned its officials on charges of violating disclosure rules back in 2015 when it acquired a stake in Samsung C&T.

The eventual merger of Samsung and Cheil in 2015 prompted a huge corruption scandal in the country, which resulted in Samsung's vice chairman Jay Y. Lee walking free from prison last month after his bribery sentence was suspended, and former president Park Geun-hye - South Korea's first female leader - sentenced to 24 years behind bars after being found guilty of bribery and abuse of power.

An FSS official declined to comment.

According to the Korea Exchange, the short selling in Samsung C&T totaled 578,171 shares and approximately 43.07 billion won (US$38.7 million) on June 5, 2015, the largest since records began in 2008.

Other reports by Click Lancashire

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