Palliser Capital backs proxy fight with Samsung C&T

Palliser Capital, a London-based hedge fund, said on Sunday it will vote in favor of other activist shareholders’ proposals for Samsung C&T Corp. to increase share buybacks and dividend payments. At the same time, it urged the National Pension Service (NPS) to join them in a proxy battle with the South Korean company at its annual general meeting (AGM).

Palliser said in a press release that the shareholder proposals, aimed at addressing the so-called Korea Discount, also won the backing of two leading proxy advisors, ISS and Glass Lewis.

The British investment firm's announcement comes less than a month after five activist funds, including City of London Investment Management, US-based Whitebox Advisors and Seoul-based Anda Asset Management, put the demands for share buyback and dividend increases on the agenda for a vote at Samsung C&T’s AGM on March 15.

The five institutional investors hold a combined 1.46% stake in the construction and trading firm. Palliser owns 0.62% of the de facto holding company of Samsung Group, Korea’s largest conglomerate.

They demand that Samsung C&T purchase 500 billion won ($376 million) worth of treasury shares this year, in addition to dividend payments of 4,500 won and 4,550 won per ordinary share and preferred share for the fiscal 2023 year.

These proposals are 76.5% and 75.0% higher, respectively, than Samsung C&T’s planned payments and would translate to 1.24 trillion won ($930 million) in cash, above its estimated free cash flow in 2024, according to Samsung.

Palliser said the shareholder proposals are consistent with its recommendations made in December to address the so-called Korea Discount.

It noted that Samsung C&T failed to take sufficient and necessary actions to close its value gap with its intrinsic market value, currently at $22 billion, equivalent to a 54% discount.

“This disappointing inaction has driven Palliser’s firm support for, and intention to vote in favor of, the Shareholder Proposals advanced by Anda Asset Management Co., Ltd, City of London Investment Management Company Limited and Whitebox Advisors LLC for an increased FY2023 dividend and a 500 billion-won share repurchase program during FY2024,” it said in the press release.

In reports issued to clients on February 27, 2024, and March 1, 2024, ISS and Glass Lewis recommended that shareholders vote for the proposals led by the five activist investors.

“Given the company's robust balance sheet, improving operational performance and strong cash flow generation, support for the dissident proposals for a higher dividend and share buyback is warranted,” Palliser quoted ISS as saying in one of the reports issued last week.

Palliser also welcomed the Korean government-led initiative to bolster undervalued domestic stocks under the so-called Corporate Value-up Program, which it said is intended to bring fundamental changes to the country’s capital markets.

Details of the government-led shareholder-friendly program have yet to be released.

Palliser also urged the NPS to support the shareholder proposals, which it said would fall under its stewardship responsibility to maximize its investment returns.

The world’s No. 3 pension fund is one of Samsung C&T's top five shareholders, with a 7.25% stake as of the end of September last year.

Samsung Group controls 33.28% of the unit, which includes the shares held by its founding family members and other friendly shareholders.

Shares in Samsung C&T have gained 41% over the past year, outperforming a 9.5% advance in the broader Kospi index over the same period.

Write to Jong-Kwan Park at pjk@hankyung.com
 

Yeonhee Kim edited this article