The National Pension Service, the nation’s largest institutional investor, is facing growing pressure to raise their voice in merger plans being pushed by conglomerates.

On Monday, Solidarity for Economic Reform, a civic group pushing for reforms of family-controlled South Korean conglomerates, or chaebol, urged the fund to review the merger plan between SK Holdings and SK C&C and to decide whether to back or veto the deal before a shareholders meeting Friday. 


The merger plan between the two SK affiliates has been pushed at the group level since April 20. SK C&C offered a merger to SK Holdings in an all-stock deal. The nation’s third-largest chaebol said it sought the deal in its effort to reorganize the group’s business portfolio.

“The deal has been off the radar for a while, shadowed by the contentious merger plan between Samsung C&T and Cheil Industries. But we found that SK’s merger plan has similarities with that of Samsung in deal-structuring, which poses a question over the intention behind the deal plan,’’ the civic group said in a statement. 

It believes SK Group designed the deal to strengthen the controlling power of chairman Chey Tae-won in the group, not to raise the value of shareholders in the long term. As chairman Chey has a controlling stake in acquirer SK C&C, the merger has the effect of boosting his ownership status.

``As the second-largest investor in SK Holdings with a 7.19 stake, the NPS has to judge whether or not the merger plan drags down the share value of SK Holdings,” SER said, urging the fund to exercise their shareholder’s right, based on the review at the incoming shareholders meeting. 

In response to growing demand for the activist shareholder role, the NPS confirmed it would call on the external committee Wednesday to decide whether to vote for or against SK’s merger deal.

With the battle between U.S. hedge fund Elliott Associates and Samsung Group over a proposed merger between Samsung C&T and Cheil Industries escalating, the NPS has also been pressed to take action against any bad intentions behind the merger plan by the nation's top chaebol, which will hamper shareholders’ value. 

The fund is the single biggest investor in Samsung C&T with around a 10 percent stake, and so its support is critical for the deal’s success, analysts said. 

It has yet to decide whether to convene the external committee to discuss which side it will take in the shareholders meeting scheduled for July 17.

“Samsung’s latest merger plan will offer the pension fund a chance to prove that it puts a top priority on shareholders’ value, detached from other conditions, including nationalism,” an SER official said.

Market watchers said the national pension fund will more actively exercise their shareholder’s right, with their influence as a key investor in the chaebol growing. 

The NPS, the world’s third-largest pension fund with $400 billion in assets, has become the biggest investor for most chaebol. The fund had stakes of more than 5 percent in 270 companies as of 2014. 

“The public money investor is also facing pressure on taking responsibility in improving governance and business practices of chaebols,” said Park Kyung-suh, head of the Korea Corporate Governance Service. 

By Seo Jee-yeon (jyseo@heraldcorp.com)