"Organized Succession" vs. "No Illegality or Loss"... NPS and Samsung C&T Hold First Hearing in Merger Damages Lawsuit

NPS: "Merger Ratio Manipulated to Increase Equity Stake"
Samsung: "Claims Already Rejected in Criminal Verdict"

The National Pension Service (NPS) and Jay Y. Lee, Chairman of Samsung Electronics, are set to engage in a legal battle over the alleged illegality of the merger between Samsung C&T and Cheil Industries. This dispute arises from the NPS’s lawsuit seeking damages, claiming it suffered losses due to the merger.

Samsung Electronics Chairman Jay Y. Lee. Photo by Yonhap News

The 21st Civil Division of the Seoul Central District Court (Presiding Judge Jeong Yong-shin) held the first hearing on March 19 for the damages lawsuit filed by the NPS against Samsung C&T, Chairman Lee, and seven others. The NPS is seeking damages of approximately 500 million won.

Both sides contested whether there were any unlawful acts during the merger process. The NPS argued that the merger ratio was intentionally set unfavorably for Samsung C&T as part of a succession plan to strengthen Chairman Lee’s control. The NPS’s legal representative stated, “The merger was carried out through an organized succession strategy at the group level. Samsung, through the merger ratio, increased the equity stake of Chairman Lee and his family, while insiders at the NPS turned a blind eye to this.”

The representative added, “Despite the duty to protect shareholders’ interests, the company committed unlawful acts by applying an unfavorable merger ratio without sufficiently reviewing the legitimacy and fairness of the merger price. Chairman Lee’s side argues there was no illegality based on the criminal verdict, but one cannot rely solely on that result; a comprehensive assessment of all evidence is required.”

In contrast, Chairman Lee’s side asserted there was no illegal conduct during the merger and no losses were incurred. The legal representative for Chairman Lee stated, “There was no unlawful act, and Samsung C&T shareholders did not suffer any losses due to the merger. This was already confirmed in related criminal and civil cases, and the same arguments made by the NPS were rejected in the directly related criminal trial.”

The court requested that future hearings address whether the merger was illegal and whether Samsung intervened to secure the NPS’s approval for the merger through government lobbying.

Previously, Cheil Industries and Samsung C&T merged in 2015 at a ratio of 1 to 0.35, meaning one share of Cheil Industries was valued at about three shares of Samsung C&T. At that time, the NPS, which held an 11.21% stake in Samsung C&T, claimed it suffered losses because Cheil Industries’ value was set higher and Samsung C&T’s value lower than market assessments.

The claim for damages targets a total of nine individuals and entities, including Chairman Lee; Choi Ji-sung, former head of the Future Strategy Office; Jang Choong-ki, former deputy head of the Future Strategy Office; Choi Chi-hoon, former CEO of Samsung C&T; Samsung C&T; Moon Hyung-pyo, former Minister of Health and Welfare; and Hong Wan-sun, former head of the NPS Investment Management Division. The amount claimed is about 500 million won.

Meanwhile, the court requested additional submissions regarding the basis for liability, causality, and the method for calculating damages. The next hearing is scheduled for June 4 at 3 p.m.

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