A South Korean court rejected Thursday a U.S. hedge fund's request to block a vote by Samsung C&T Corp. shareholders on a high-stakes merger with a sister firm, clearing the legal hurdle on the eve of a crucial shareholder meeting.

The Seoul High Court also turned down Elliott Associates' appeal of a district court's rejection of an injunction request to nullify the voting rights of KCC Corp., which increased its stake in the builder through a treasury share purchase.

Earlier this month, the Seoul Central District Court dismissed both requests by Elliott, the third-largest shareholder in Samsung C&T. The fund strongly opposes the merger, claiming the deal undervalues Samsung C&T and hurts the interests of its shareholders.

Shareholders of Samsung C&T are scheduled to meet on Friday to vote on the 8.9 trillion won ($7.76 billion) all-stock takeover offer by Cheil Industries Inc., the de facto holding firm of South Korea's top conglomerate.

In a ruling statement, the appellate court said it dismissed Elliott's case because the merger ratio of 1:0.35 for Samsung C&T and Cheil Industries -- one of the most contentious issues raised by the hedge fund -- has been set in accordance with current law.

"The court does not see the management's decision based on such a calculation as "irrational," it said.

The court said it turned down Elliot's request to ban KCC's voting rights as there won't be a chance for KCC to make an appeal and get its voting rights redeemed due to "time constraints," the court said, referring to the fact that the shareholder meeting is a day away.

The hedge fund, led by activist billionaire Paul Singer, has claimed that the merger plan undermines the value of Samsung C&T and the shareholders' interests, since the terms of the merger are based on an underestimation of the builder's value while greatly inflating that of Cheil Industries.

Market watchers said Elliott won't likely appeal the decision with the Supreme Court, given the timing of the verdict. Instead , there is a high possibility that it will build a new case against Samsung to invalidate the merger plan if it gets shareholders' approval on Friday, they added.

The court's dismissal of the appeals has cleared the legal hurdles for the Samsung units' move to push through the merger considered key to a smooth leadership transfer for the controlling Lee family, they added.

Lee Jay-yong, the 47-year-old son of the group's patriarch Lee Kun-hee, needs to tighten his grip on ownership in the absence of his father who has been ill in bed for more than a year due to a heart attack.

In its first ruling, the district court had said that the merger ratio cannot be seen as unfair since it was set based on their share prices as required by law.

It also ruled in favor of Samsung C&T in the treasury shares sale to KCC, saying it "doesn't go against social norms."

Samsung C&T and Elliott have been embroiled in a proxy fight to win more votes for each other's claims, wooing shareholders to their sides through heated media campaigns. (Yonhap)