Following the conviction of Samsung Group heir Lee Jae-yong for bribery, attention is now shifting to the validity of a 2015 merger between two Samsung companies, which Lee allegedly used bribery to ensure.
People watch a TV screen showing Samsung Electronics vice chairman Lee Jae-yong's arrival for his verdict hearing at the Seoul Central District Court, Aug. 25, 2017. (Photo credit: Yonhap)
The controversial deal, which combined Cheil Industries and Samsung C&T to give birth to the new Samsung C&T, is being contested at court by minority shareholder Ilsung Pharmaceuticals, which is seeking to invalidate the deal. Ilsung, which held a 2.11 percent stake in the before-merger C&T, filed the suit in March 2016, claiming the deal strengthened Lee’s equity control over the conglomerate at the expense of minority shareholders.
The Seoul Central District Court on Friday found Samsung Electronics Vice Chairman Lee guilty of bribing the now-ousted President Park Geun-hye to earn political support for the merger deal. Lee was sentenced to five years in jail.
In a separate case, the same court earlier ruled the then-health minister guilty of pressuring the National Pension Service, the single largest shareholder of C&T, to vote in favor of the deal.
Friday’s court ruling is expected to have an impact on the pending case on the merger deal, with minority shareholders saying it unduly aided Lee, the only son of the group’s ailing Chairman Lee Kun-hee, in the succession process. Samsung attorneys say the merger was to drive growth.
The court had earlier delayed a decision on whether to invalidate the merger, as Lee’s trial was ongoing. The court is expected to rule in October.
The deal was highly controversial at that time.
Elliott Management, a US-based hedge fund which had launched a high-profile campaign to block the deal, also filed a similar suit but settled with Samsung in March.
Also in a separate suit last year, the Seoul High Court ruled the deal greatly undervalued Samsung C&T and overvalued Cheil Industries. Lee was the largest stakeholder in Cheil Industries. The Supreme Court is to make a final judgement on that.
How this merger litigation will play out will remain as one of the most pressing concerns for the group, which alone generates one fifth of South Korea’s gross domestic product, with its nominal chairman, the senior Lee, hospitalized since 2014 and the de facto chief, the young Lee, in jail.
The junior Lee has been behind bars since February, implicated in a massive scandal that led to the former president’s expulsion from power. The former leader is currently standing trial on a total of 18 charges.
Lee Jae-yong was found guilty on all five charges -- bribery, embezzlement, concealment of criminal proceeds, illegal transfer of assets overseas and perjury. Samsung lawyers said he will appeal.
By Bak Se-hwan (sh@heraldcorp.com)
