[SEOUL] Locked in a battle with an activist US hedge fund, the Samsung Group's de facto holding company sought to win support for a proposed US$8 billion merger with a sister firm by pledging measures to bolster post-deal shareholder returns.

Cheil Industries said in a statement on Tuesday that the company formed on completion of its all-stock takeover of Samsung C&T Corp would gradually increase its dividend payout ratio to 30 per cent by 2020 and also consider share buybacks.

On a forecast 2020 pre-tax profit of 4 trillion won, the dividends would amount to 4,800 won (S$5.8) per share, Cheil said. It also promised a governance committee within the board of directors to guard investor interests.

The announcement came as Samsung Group seeks to fend off a challenge from Samsung C&T shareholder Elliott, a hedge fund that opposes the merger and has filed two injunction requests with a South Korean court to block it. The court may issue rulings on both requests on Wednesday.

The deal is seen as critical to the leadership transfer process for Samsung Group's founding Lee family. The merged entity would consolidate stakes in key companies including Samsung Electronics Co Ltd into a vehicle firmly controlled by the Lee heirs, helping cement the succession process.

In a rare case of shareholder activism in a country that has long been wary of foreign investors, Elliott has repeatedly criticised the deal as unfair to Samsung C&T shareholders and called on investors to vote against Cheil's offer.

Investors in Samsung C&T such as overseas fund firms Aberdeen Asset Management and APG Asset Management and South Korea's Ilsung Pharmaceutical Co have also spoken out against the deal, while some domestic investors have voiced their support.

Samsung C&T shareholders are scheduled to vote on the merger on July 17.

REUTERS