Samsung clears hurdle on way to $8 bln shakeup as court rules against U.S. fund

By Sohee Kim

SEOUL (Reuters) - A South Korean court on Tuesday denied an injunction request by a U.S. hedge fund trying to block builder Samsung C&T Corp from selling treasury shares to ally KCC Corp , clearing another hurdle for a proposed $8 billion merger of Samsung Group [SAGR.UL] firms.

The ruling comes ahead of a July 17 Samsung C&T shareholder vote on an all-stock takeover offer from Cheil Industries Inc , the de facto holding company of Samsung Group. The verdict allows chemicals and construction materials firm KCC, Cheil's second-biggest shareholder, to exercise voting rights for the treasury shares.

Explaining its ruling against the request from fund Elliott Associates, the Seoul Central District Court said Samsung C&T violated no laws in selling treasury shares to KCC. With a total of around 6 percent of C&T, including the 5.8 percent stake purchase approved by the court, KCC is the Samsung construction firm's fourth-largest shareholder and will back the Cheil deal.

Elliott said in a statement after the ruling was issued that C&T's treasury sale is "wholly improper" and it plans to appeal the ruling.

The Cheil-Samsung C&T merger is seen as a key step towards a leadership transfer for the Samsung Group's founding Lee family, as it consolidates stakes in key affiliates under the Lee heirs' control. But opposition from Elliott, C&T's third-largest shareholder with a 7.1 percent stake, has led to doubts about whether Samsung C&T can muster enough support from shareholders.

C&T needs the support of at least two-thirds of the votes cast on July 17 to proceed with the deal, making KCC's voting rights important. Recent reports from two influential proxy advisors calling on C&T investors to reject the takeover offer could bolster Elliott's efforts to block the deal, a rare case of investor activism in South Korea.

Elliott had filed the injunction seeking to block Samsung C&T's stake sale to KCC in June. It has also appealed a court ruling against its other injunction request, which sought to prevent the July 17 shareholder vote for C&T investors taking place.

Samsung C&T said in a statement on Tuesday it welcomed the court's ruling and will work to convince shareholders of the merits of the proposed merger. KCC had no immediate comment.

(Additional reporting by Joyce Lee; writing by Se Young Lee; Editing by Kenneth Maxwell)