A Seoul court handed Samsung C&T another win Tuesday, setting back billionaire activist investor Paul Elliott Singer’s effort to stop the company’s proposed merger with Cheil Industries, the de facto holding company of Samsung Group.

The Seoul Central District Court rejected U.S. hedge fund Elliott Associates’ request to ban Samsung C&T ally KCC Corp. from voting on the planned merger offer with treasury shares bought from the Samsung construction unit.

The court said it was “difficult to understand that the treasury sale is ‘unfair’ by social norms, nor is it against social order.”  

Samsung C&T welcomed the court’s ruling, saying “We strongly believe that the proposed merger is in the best interest of the company and our shareholders.”

“The court ruling recognizes the legitimacy of the merger and it is expected to help the company draw shareholder support,” it said.

Elliott has decided to appeal.

“We note the court’s decision but maintain our firm view that the deliberate sale of treasury shares, designed solely to support a fundamentally unfair deal for Samsung C&T’s shareholders, was wholly improper, not least from a corporate governance perspective,” the fund said in an emailed statement.

Last week, the court rejected the fund’s first injunction to block a shareholders vote on the merger deal slated for July 17.

The first ruling dealt a blow to Elliott, Samsung C&T’s third-largest shareholder, which had urged other investors to oppose Cheil’s takeover, claiming that the proposed 1 to 0.35 stock swap ratio significantly undervalues the builder and therefore will damage minority shareholders.

To fend off the challenge from Elliott, Samsung C&T brought in KCC, traditionally a Samsung ally with ties to Hyundai Group, to buy the $607 million worth of the Samsung unit’s treasury shares ahead of the contested shareholders meeting. 

Now attention is being paid to the stance of the National Pension Service, the largest shareholder of the construction unit with a stake of 11.61 percent as of Tuesday. The state-run company purchased additional shares Friday to add to the previous 9.92 percent.

“Samsung has been continuously trying to appeal to the NPS as it has the power to block the tie-up,” a source said, declining to be named due to the sensitivity of the issue.

“(Samsung heir apparent) Lee Jay-yong’s public apology over the MERS outbreak is also part of the group’s efforts to appeal to the Health Ministry, which has the NPS under its operations. That just shows what the NPS means for this deal,” he said. 

By Suk Gee-hyun (monicasuk@heraldcorp.com)