An appeal court on Tuesday ordered Samsung C&T, the fashion and trading unit of Samsung Group, to increase the stock buyback price proposed to shareholders who opposed its merger with Cheil Industries last year.

Samsung C&T, the merged entity and de facto holding company of the nation’s largest conglomerate, said it would appeal the ruling overturning a lower court’s decision. 

“After a thorough review of the court’s ruling, we plan to file an appeal with the Supreme Court,” the company said.

In September last year, the highly publicized merger combined Samsung C&T and Cheil Industries as part of Samsung’s ongoing efforts to streamline its business structure across affiliates.

Even though a majority of shareholders voted in favor of the plan, some minority investors in C&T opposed the move, citing an unfavorable share swap ratio. One C&T share was exchanged for 0.35 share in Cheil at the time.

After the merger was approved, C&T proposed to its shareholders that it would buy back their holdings at 57,234 won ($48) per share based on the company’s then stock price. But five minority shareholders filed a suit, claiming the price was too low.

Their request was declined in a lower court, but they appealed to a higher court. On Tuesday, the Seoul High Court ruled the five shareholders, including Ilsung Pharmaceuticals and four individual investors, should be offered 66,602 won per share, the price before the merger plan was announced.

If the Supreme Court confirms the ruling, C&T must pay an additional 34.7 billion won, including 31 billion won to Ilsung.

There is the possibility that other shareholders who have already sold off their shares based on the original price could file a suit against the company. Last year, a total of 11.71 million shares, worth 37 billion won, were repurchased.

Ilsung, a local drugmaker that held 2.11 percent of C&T, started the suit last year together with Elliott Associates, the C&T shareholder that led the campaign to block the merger.

After they lost in a lower court, the U.S. activist hedge fund withdrew all its filings in Korea.

“The court’s decision was unexpected considering the merger between C&T and Cheil was carried out legally,” said Hwang Se-woon, a senior researcher at Korea Capital Market Institute.

“The court intends that the rights of minority shareholders should be better protected during a merger process.”

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