Elliott Associates, the U.S. activist hedge fund, stepped up its attack on the proposed merger between Samsung C&T and Cheil Industries on Thursday, a day before the escalating dispute goes to court in Seoul.

Elliott unveiled a 27-page online presentation, reaffirming its opposition to the merger plan. It instead newly expressed support for Samsung Group’s restructuring for a successful leadership transition in a move to appeal to shareholders.

“Elliott firmly believes that the proposed takeover by Cheil Industries of Samsung C&T at a merger ratio of 0.35 Cheil Industries shares for each Samsung C&T share is unlawful,” the fund said.

“While Elliott understands and is supportive of the need for a restructuring of Samsung Group in connection with the potential succession of control over it, any transaction proposals which are part of that restructuring must comply properly with applicable corporate governance standards and therefore properly recognize the value attributable to Samsung C&T’s shareholders.”

Industry watchers said Elliott was ramping up efforts to gain support from shareholders ahead of court hearings on its injunction request to block the merger deal on Friday. A ruling is expected to come out before Samsung C&T shareholders’ meeting on July 17.

“Elliott knows opposing the restructuring doesn’t help elevate share prices and earn support from shareholders,” said an industry source. “As it focuses on the merger ratio, it has become clear that Elliott’s main purpose is taking higher profitability from share holdings.”

Elliott said it prepared for the presentation to be submitted to proxy arbitration firm Institutional Shareholder Services, which is expected to issue its own stance on the merger deal early next month.

Samsung C&T dismissed the presentation, saying “It was repeating Elliott’s existing claims and the merger process is carried out in line with Korean laws.”

In the meantime, Kyobo Securities predicted Thursday that the proposed merger between the two Samsung affiliates would get approval at the shareholders meeting. If it fails, it said, that would affect negatively both Samsung C&T’s share prices and Elliott’s profitability.

“Ironically, Elliott’s opposition would play a key role in approving the merger plan,” said Baek Gwang-je, an analyst at the securities firm, adding that Samsung C&T’s share prices surged after its opposition announcement.

According to him, if the merger fails, the share prices are likely to drop to the previous level before the merger announcement. The owner family is also likely to seek other ways to secure more Samsung Electronics shares, rather than pushing ahead with the merger, he said.

“Investors don’t want both scenarios,” he said.

By Lee Ji-yoon (jylee@heraldcorp.com)