February 18, 2019

Support for Samsung merger was backed by false report: NPS

PUBLISHED : July 03, 2018 - 15:17

UPDATED : July 03, 2018 - 15:31

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[THE INVESTOR] The National Pension Service, which played a key role in supporting a controversial merger between two Samsung units, on July 3 said the case for support had been backed by false internal reports.

The NPS conducted an internal investigation from March 20 to June 20 to figure out why its officials backed the controversial merger between Samsung C&T and Cheil Industries in 2015. As the largest shareholder of Samsung C&T with an 11 percent stake, NPS voted for the merger to be approved, touting business synergies of the deal in a report written by the internal research division. 

According to the investigation, the NPS’ backing was based on false reports that exaggerated synergies of the merger at Samsung’s preferred ratio.

Behind the manipulation was then head of the research division at the pension fund, Chae Jun-kyoo, who ordered to preset the merger synergies at 2.1 trillion won (US$1.86 billion) when merged at the ratio of 1:0.35 for Samsung C&T and Cheil Industries as preferred by Samsung. Chae was fired on June 29.

The amount of 2.1 trillion won was necessary to offset projected losses of 138.8 billion won if the NPS were to step back from the merger ratio of 1:0.46.

Due to the 1:0.35 swap ratio under which one Samsung C&T share was exchanged for just 0.35 shares in Cheil Industries, Samsung Electronics Vice Chairman Lee Jae-yong was able to grab a bigger stake in Samsung C&T, which more or less controls most of the important Samsung units, including Samsung Electronics. As a result, the merger deal is estimated to have cost at least 138.8 billion won in losses for the pension fund, which holds 626 trillion won in assets.

By Park Ga-young (

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