Activist investor Flashlight Capital Partners has offered to buy the stakes held by five Samsung affiliates in South Korean security-services company S-1 Corp at a 45% premium, according to a report by Bloomberg.
The move puts the companies’ boards under scrutiny as South Korea’s strengthened shareholder protections take effect.
The Singapore-based investor said it has proposed paying 116,000 won per share for the combined 20.6% holding owned by Samsung SDI, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung Securities and Samsung Card. The proposed transaction would be worth about KRW906.6bn ($655m).
The offer is above S-1’s previous record closing price of KRW115,000, set in July 2016. Flashlight has given the five Samsung affiliates until 23 September to respond.
S-1 shares rose as much as 11% to KRW89,000 following news of the proposal before giving up most of the gains to trade around 3% higher.
Flashlight, which owns less than 5% of S-1, is using a strategy often described as a “bear hug” — an unsolicited offer made directly to a company’s board at a substantial premium, creating pressure on directors to consider the proposal rather than risk turning down an attractive opportunity for shareholders.
The proposal could provide an early test of South Korea’s revised Commercial Act, which expanded directors’ fiduciary responsibilities to cover shareholders generally rather than focusing primarily on the interests of controlling shareholders.
The changes, backed by President Lee Jae Myung, are intended to address concerns that Korean corporate boards have historically favoured controlling families at the expense of minority investors.
Flashlight founder Sanghyun Lee argued that the five Samsung affiliates have little strategic justification for continuing to own S-1.
Samsung SDI is focused on the capital-intensive battery sector, while the four Samsung financial companies are subject to regulatory restrictions governing cross-shareholdings between financial and non-financial businesses, according to Lee.
Flashlight argues that disposing of the S-1 holdings would allow the affiliates to redeploy capital into their core operations or return more money to shareholders.
Regulatory filings show Samsung SDI owns 11.03% of S-1, while Samsung Life Insurance holds a further 5.34%.
Flashlight said it is also a shareholder in each of the five Samsung affiliates targeted by its proposal.
The Samsung companies and S-1 reportedly did not immediately respond to requests for comment.
