Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Event-Driven

Proxy advisors Glass Lewis and Institutional Shareholder Services - the two largest global proxy advisors - have come out against the proposed merger between Samsung C&amp;T (000830 KS) and Cheil Industries (028260 KS) in reports offering blunt and harsh opinions of the process and terms.Both advisors recommend in no uncertain terms that shareholders reject the deal.  There is not a single quote from their reports, in any media source I can find, which is remotely close to neutral, supportive, or understanding of the deal in any way.In the history of Glass Lewis and ISS opinions I have read regarding large-cap situations over the past 15yrs, this ranks way up at the very top in terms of its scathing language and tone of disapproval. Released July 2 Asia time, Glass Lewis' report attacked the merger process, the merger terms, C&amp;T management due diligence, C&amp;T board actions since the merger announcement, the regressive deal protection, and even the 'overheated valuation' of Cheil shares. ISS came out on July 3rd with similar language.TAKEAWAYS<ul><li>ISS and Glass Lewis represent the two most significant proxy advisory services for international investors (who now represent 33+% of the shareholder register). These opinions will mean that hundreds of foreign institutional investors who had "not yet decided" are now substantially more likely to vote against the deal. </li><li>If every single share held by foreign investors is voted against the deal, it is highly likely that the deal will break. If foreigners vote at a 60% rate against the deal, then it may come down to either a low turnout, a substantial vote against from Korean retail investors, or the National Pension Service vote.</li><li>National Pension Service has increased its position from 10.2% to 11.6% at prices which are above the "fair value" price for Cheil Industries' shares, and which cannot be voted in this deal. They were purchased at several percent through terms - an expensive way to own Cheil if the deal goes through, and won't own Cheil if it doesn't go through. Logic would suggest that means NPS bought the shares for what they are now, not what they will become. It is tough to imagine they plan to vote for the deal if they buy C&amp;T shares more expensively than they could buy Cheil shares unless they see that indeed, Samsung Group will indeed come back and do another deal.</li><li>This deal is far more EGREGIOUS than the SK deal the NPS just voted against. It would be easy to see the NPS voting against this deal. </li><li>Lots of Korean retail investors are still against this deal.</li><li>The Glass Lewis and ISS reports have received little notice in the Korean press. </li><li>As described in the previous <a href="http://www.smartkarma.com/insights/samsung-group-immodest-accounting-and-a-modest-proposal" target="_blank">Immodest Accounting and a Modeft Propofal</a> piece, there are other ways to get this done which get C&amp;T shareholders out of their assets at a level much closer to a fair price, keep the shares within the Lee/Samsung circle of trust, AND the whole thing can be done "fairly" to minorities at the same time as supporting the C&amp;T CEO's premise that he wants to create <a href="http://www.bloomberg.com/news/articles/2015-07-02/samsung-c-t-chief-invokes-virtues-of-ge-in-defense-of-merger" target="_blank">a new GE</a>. </li></ul>More below the fold...Some previous Smartkarma reports on the Samsung C&amp;T/Cheil saga: <a href="http://www.smartkarma.com/insights/samsung-c-t-too-big-to-cheil" target="_blank">Samsung C&amp;T:  Too Big to Cheil </a><a href="http://www.smartkarma.com/insights/samsung-c-t-completely-the-wrong-price-trillions-being-left-on-the-table" target="_blank">Samsung C&amp;T: Completely the Wrong Price - TRILLIONS being left on the table </a><a href="http://www.smartkarma.com/insights/samsung-c-t-quicknote-30-40-foreign-institutional-investors-ask-for-fairer-swap-rate" target="_blank">QuickNote: "30-40 Foreign Institutional Investors Ask For Fairer Swap Rate" </a><a href="http://www.smartkarma.com/insights/samsung-c-t-quicknote-volume-patterns-and-ownership-changes-since-deal-announcement" target="_blank">QuickNote: Volume Patterns and Ownership Changes Since Deal Announcement </a><a href="http://www.smartkarma.com/insights/shareholder-activism-around-samsung-c-t-legal-limitations" target="_blank">Shareholder Activism around Samsung C&amp;T - Legal Limitations </a><a href="http://www.smartkarma.com/insights/helmets-on-c-t-sells-treasury-shares-to-pensions-increase-stake" target="_blank">Helmets On - C&amp;T Sells Treasury Shares to KCC, Pensions Increase Stake </a><a href="http://www.smartkarma.com/insights/treasury-shares-differences-and-similarities-to-precedent-cases" target="_blank">Treasury Shares - Differences and Similarities to precedent cases </a><a href="http://www.smartkarma.com/insights/samsung-group-who-holds-what-b6a93db6-e0b4-4e15-b7a5-e01364b0ef72" target="_blank">SAMSUNG GROUP: Who Holds What? </a><a href="http://www.smartkarma.com/insights/samsung-group-immodest-accounting-and-a-modest-proposal" target="_blank">Samsung Group - Immodest Accounting and a Modest Proposal </a><a href="http://www.smartkarma.com/insights/south-korea-s-national-pension-service-smashing-traditions" target="_blank">South Korea’s National Pension Service - Smashing Traditions </a><a href="http://www.smartkarma.com/insights/the-holding-company-view-it-s-never-looked-so-good" target="_blank">The Holding Company View: It's Never Looked So Good </a><a href="http://www.smartkarma.com/insights/c-t-cheil-a-big-day-tomorrow-but-did-cheil-put-their-foot-in-it" target="_blank">C&amp;T/Cheil: A Big Day Tomorrow, But.... Did Cheil Put Their Foot In It?</a>

Proxy advisors Glass Lewis and Institutional Shareholder Services - the two largest global proxy advisors - have come out against the proposed merger between Samsung C&amp;T (000830 KS) and Cheil Industries (028260 KS) in reports offering blunt and harsh opinions of the process and terms.Both advisors recommend in no uncertain terms that shareholders reject the deal.  There is not a single quote from their reports, in any media source I can find, which is remotely close to neutral, supportive, or understanding of the deal in any way.In the history of Glass Lewis and ISS opinions I have read regarding large-cap situations over the past 15yrs, this ranks way up at the very top in terms of its scathing language and tone of disapproval. Released July 2 Asia time, Glass Lewis' report attacked the merger process, the merger terms, C&amp;T management due diligence, C&amp;T board actions since the merger announcement, the regressive deal protection, and even the 'overheated valuation' of Cheil shares. ISS came out on July 3rd with similar language.TAKEAWAYSISS and Glass Lewis represent the two most significant proxy advisory services for international investors (who now represent 33+% of the shareholder register). These opinions will mean that hundreds of foreign institutional investors who had "not yet decided" are now substantially more likely to vote against the deal. If every single share held by foreign investors is voted against the deal, it is highly likely that the deal will break. If foreigners vote at a 60% rate against the deal, then it may come down to either a low turnout, a substantial vote against from Korean retail investors, or the National Pension Service vote.National Pension Service has increased its position from 10.2% to 11.6% at prices which are above the "fair value" price for Cheil Industries' shares, and which cannot be voted in this deal. They were purchased at several percent through terms - an expensive way to own Cheil if the deal goes through, and won't own Cheil if it doesn't go through. Logic would suggest that means NPS bought the shares for what they are now, not what they will become. It is tough to imagine they plan to vote for the deal if they buy C&amp;T shares more expensively than they could buy Cheil shares unless they see that indeed, Samsung Group will indeed come back and do another deal.This deal is far more EGREGIOUS than the SK deal the NPS just voted against. It would be easy to see the NPS voting against this deal. Lots of Korean retail investors are still against this deal.The Glass Lewis and ISS reports have received little notice in the Korean press. As described in the previous Immodest Accounting and a Modeft Propofal piece, there are other ways to get this done which get C&amp;T shareholders out of their assets at a level much closer to a fair price, keep the shares within the Lee/Samsung circle of trust, AND the whole thing can be done "fairly" to minorities at the same time as supporting the C&amp;T CEO's premise that he wants to create a new GE. More below the fold...Some previous Smartkarma reports on the Samsung C&amp;T/Cheil saga: Samsung C&amp;T:  Too Big to Cheil Samsung C&amp;T: Completely the Wrong Price - TRILLIONS being left on the table QuickNote: "30-40 Foreign Institutional Investors Ask For Fairer Swap Rate" QuickNote: Volume Patterns and Ownership Changes Since Deal Announcement Shareholder Activism around Samsung C&amp;T - Legal Limitations Helmets On - C&amp;T Sells Treasury Shares to KCC, Pensions Increase Stake Treasury Shares - Differences and Similarities to precedent cases SAMSUNG GROUP: Who Holds What? Samsung Group - Immodest Accounting and a Modest Proposal South Korea’s National Pension Service - Smashing Traditions The Holding Company View: It's Never Looked So Good C&amp;T/Cheil: A Big Day Tomorrow, But.... Did Cheil Put Their Foot In It?

C&T/Cheil:  Proxy Advisors Lambaste "Profoundly Unattractive" Deal

South Korea

Samsung Pharmaceutical Co., Ltd. manufactures medicines to treat a variety of diseases.  The Company's products include medicines for inflammatory, nutrition, and digestive system.

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Samsung Pharmaceutical (001360 KS)

C&T/Cheil: Proxy Advisors Lambaste "Profoundly Unattractive" Deal

Proxy advisors Glass Lewis and Institutional Shareholder Services - the two largest global proxy advisors - have come out against the proposed...

Travis Lundy

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