U.S.-based hedge fund management firm Elliott Management on Thursday announced that it has become one of the major shareholders of Samsung C&T, and opposes its planned merger with Cheil Industries.

This is the first opposition raised against the plan to merge the two main pillars of Samsung Group.

“Elliott believes that Cheil Industries’ proposed takeover undervalues Samsung C&T and that the terms are neither fair nor in the best interests of Samsung C&T’s shareholders,” the firm said in a press release.

Elliott also reported that it holds a total of 11,125,927 shares, or 7.2 percent, of Samsung C&T as of Wednesday.

The purchase made Elliott the third largest shareholder of Samsung C&T, a trading and construction firm, following the National Pension Service and Samsung SDI. Samsung Electronics chairman Lee Kun-hee holds 1.41 percent of C&T while his wife Hong Ra-hee as well as his children Jay-yong, Boo-jin and Seo-hyun hold no stake.

It is uncertain why Elliott has secured the stakes of C&T despite its disapproval of the merger. “The date of the acquisition is not clear ― whether it had less than 5 percent stake then increased it Wednesday, or whether it has acquired the entire 7.12 percent,” a publicist for Elliott told The Korea Herald.

A market analyst, who declined to be named, said that Elliott may be looking at increasing the share price through the nullification, then sell it for a higher price. A similar case took place in 2004, when U.K.-based Hermes Investment management acquired 5 percent of Samsung C&T, hinted at its attempt to acquire the whole company, then sold all its shares at a higher price and reaped 30 billion won.

“We are striving to raise the company’s value by communicating more with our shareholders”, C&T said in a press release Thursday.

Under the merger plan announced Tuesday, Cheil will acquire Samsung C&T by offering 0.35 new shares for each share of C&T and set up a new firm, which will also be named Samsung C&T, on Sept. 1. The two companies explained that the deal would create a 60-trillion-won ($54 billion) global enterprise by 2020.

Experts have raised concerns that C&T shares have been undervalued. Some forecast that major shareholders could cast their ballots against the merger at the planned shareholders meeting in July.

Attention will focus on the National Pension Service, the largest shareholder of Samsung C&T. The NPS recently refused the merger of Samsung Engineering and Samsung Heavy Industries, which had to be nullified.

By Bae Ji-sook (baejisook@heraldcorp.com)