Action Fund Alliance "Samsung C&T Dividend Expansion"... Not a Vote Battle but a 'Long-term Public Opinion War'

Total Shareholding 1.46%... "Impossible to Win the General Meeting"
"Raising Public Awareness, Aiming for Long-term Owner Pressure Effect"
New Trends like Wolfpack Strategy... Voices Growing Louder

Several activist funds have joined forces to strongly demand an increase in dividends from Samsung C&T Corporation. Capital market experts say, "The likelihood of the activist funds' demands being accepted at the Samsung C&T shareholders' meeting is virtually 'zero' (0)," but they also predict that such shareholder return demands will intensify over time.

According to the Financial Supervisory Service's electronic disclosure system on the 19th, Samsung C&T recently announced the convening of its regular shareholders' meeting on the 15th of next month, and stated that agenda items proposed by UK-based asset management firm City of London, including 'share buybacks' and 'cash dividends,' have been submitted as agenda items. The shareholder proposals involved five activist funds, including City of London, Whitebox Advisors (U.S.-based), and Anda Asset Management (Korean-based). City of London and others are recognized as activist funds that have consistently emphasized the necessity of shareholder returns even overseas.

Samsung C&T Appeals via Disclosure to "Oppose the Coalition's Proposal"

The main agenda items demanded by the fund coalition at the shareholders' meeting are △ share buybacks worth 500 billion KRW △ dividends of 4,500 KRW per common share (4,450 KRW per preferred share). This dividend amount is more than 75% higher compared to the Samsung C&T board's proposal. The board's proposal is a dividend of 2,550 KRW per common share (2,600 KRW per preferred share). If the dividend is raised as per the shareholder proposal, the total shareholder return would reach 1.2364 trillion KRW, exceeding 100% of the free cash flow (excluding Samsung Biologics) for last year and this year.

In response, Samsung C&T unusually appealed through a disclosure, urging shareholders to "delegate voting rights to oppose the shareholder proposal." It emphasized that "If cash outflows occur as per the shareholder proposal, it will be difficult to secure internal investment funds necessary for future growth engines and strengthening business competitiveness." Samsung C&T also highlighted that the company agrees with the value of shareholder returns and is implementing related policies. On the 31st of last month, it disclosed that it would cancel 7,807,563 common shares and 159,835 preferred shares, with all preferred shares planned to be canceled.

Han Byung-hwa, a researcher at Eugene Investment & Securities, said, "Samsung C&T has partially reflected investors' demands by announcing share buybacks in the board's proposal. While the demands of activist funds can be considered, it is difficult to raise dividends sharply in the short term," adding, "If a company raises dividends too much, investment activities may become difficult." He said, "Ultimately, shareholder returns and investments must go hand in hand. Companies need to invest to increase future profits, and profits must increase for shareholder returns to increase. It is up to the company to balance how much to allocate to each."

Within the industry, the possibility of the so-called 'vote battle' at the shareholders' meeting resulting in acceptance of the shareholder proposal is considered almost nonexistent. The combined stake of the fund coalition is only 1.46%. A capital market official explained, "Activist funds clearly know they cannot win in a vote battle. Since the Asian financial crisis, there have been various attacks by foreign activist funds, but there are almost no cases where they won a vote battle. Instead, activist funds have made short-term capital gains as stock prices rose amid management disputes and left with a smile."

Park Jong-ryeol, a researcher at Heungkuk Securities, said, "Looking at Korea's ownership and control structure, the internal shareholding of conglomerate owners exceeds 60% through affiliate investments," lowering the chances of the fund coalition winning. Another researcher predicted, "This agenda is merely to publicize the level of demands by activist funds domestically and internationally, and such claims will not have any special short-term impact at the shareholders' meeting."

Fund Coalition Has Little Chance in Vote Battle... "But the Public Opinion Battle Starts Now"

However, demands for shareholder returns by activist funds are expected to strengthen further. The government is introducing a 'Corporate Value-Up Program,' and companies are preparing for the upcoming shareholders' meeting season next month. Several activist funds in Korea appear to be aggressively employing a wolfpack strategy, where multiple funds unite to attack a single company.

Lee Sang-heon, a researcher at Hi Investment & Securities, predicted, "The wolfpack strategy could become full-fledged in the future. Policies to expand shareholder returns, such as share buybacks, cancellations, and dividend increases, will gain more momentum." Park said, "The wolfpack strategy has been rare in Korea until now. Fund coalitions are a recent trend," adding, "It is much more advantageous in terms of shaping public opinion. There may also be a belief that this process could create some room for change in the company's owner. Ultimately, starting with Samsung C&T, the voices of activist funds will continue toward other companies."

Some opinions suggest that the fund coalition's demands are somewhat reasonable. Korea's overall corporate shareholder return rate and dividend payout ratio have been low internationally, which has contributed to the so-called 'Korea discount' (undervaluation of the Korean stock market). Park said, "Looking at international trends, Korea's dividend payout ratio has been very low. In this case, the activist funds' demand for dividend increases is about twice the company's proposal. Samsung C&T's dividend yield has been around 1.7-2%, so even doubling it is only about 4%. The company has sufficient capacity to meet such demands, and this aligns with long-term direction."

This content was produced with the assistance of AI translation services.