Samsung’s Lee cleared of charges over Samsung C&T merger

The Seoul Central District Court on Monday acquitted Samsung Electronics Co. Chairman Jay Y. Lee of charges of being involved in illegal activities related to the 2015 merger between Samsung C&T Corp. and Cheil Industries Inc., which led to him taking a tighter grip over the world’s largest chipmaker.

Lee and about a dozen ex-Samsung employees were indicted in 2020 on charges of stock price manipulation, accounting fraud and breach of trust under the Capital Markets Act.

Prosecutors claimed the 1:0.35 merger ratio of Samsung C&T and Cheil Industries was set to the benefit of Cheil shareholders, but detrimental to Samsung C&T shareholders.

At the time, Lee and his family had more shares in Cheil than in Samsung C&T.

In the indictment, prosecutors said the merger ratio drove Cheil Industries' stock price higher while sending Samsung C&T’s lower.

Higher valuations of Cheil helped Lee and his family take control of the construction and trading unit, now a holding company, at minimal cost.

Control of Samsung C&T then led to greater control of Samsung Electronics, and eventually a smooth transfer of its leadership to Lee.

Because of the high share price of the world’s biggest memory chipmaker, the Lee family had found it difficult to increase its Samsung Electronics shareholding in the market.

After the merger of the two Samsung units, Lee and his family secured a 39.9% stake in the combined firm.

But the lower court rejected the prosecutor's claim on Monday, saying there was no proof that they committed illegal activities in their merger.

The former Samsung employees accused of the same charges were found not guilty as well.

Based on the merger ratio of 1:0.35, every Samsung C&T share was exchanged for 0.35 of a Cheil Industries share.

The lower court ruled there was no evidence to prove the merger ratio caused damage to Samsung C&T shareholders.

It also cleared Samsung Biologics Co., a then subsidiary of Cheil Industries, of charges of false disclosure and fraudulent accounting of Samsung Bioepis Co., its wholly owned subsidiary.

Samsung C&T is the largest shareholder of Samsung Biologics, a contract drug manufacturing company.

Write to Lan Heo at why@hankyung.com
 


Yeonhee Kim edited this article.