The merger between Samsung C&T and Cheil Industries, through a stock-for-stock transaction with a ratio of 1:0.35, was approved with the support of the NPS, the largest institutional investor of the former.

But questions have remained over the NPS’ decision, as the state fund exercised its voting right after a review by an internal committee, not by an independent panel, and as the ratio of the merger itself was considered disadvantageous for Samsung C&T shareholders. Before the merger, NPS held an 11.6 percent stake in Samsung C&T and a 5 percent stake in Cheil Industries.

While admitting that the merger ratio was unfavorable for Samsung C&T shareholders, NPS has refuted the allegations and said the decision was made through “a comprehensive review” by the pension fund as a financial investor.

“We have reached the final decision to approve the deal, judging that the synergy effects expected from the merger would offset (the damage to be inflicted from) the unfavorable ratio of merger,” said NPS in a statement on Wednesday.

Amid the intensifying probe, legal sources here raised the possibility of shareholders’ bringing the case to court.

On Tuesday, a group of former shareholders of Samsung C&T claimed that the NPS inflicted damage by “illegally intervening in the case,” Maeil Economic Daily reported. They are considering seeking to “nullify” the deal itself, but said they would first closely watch the prosecution’s probe, as well as a planned parliamentary probe on the case.

In June, civic groups including the People’s Solidarity for Participatory Democracy also filed a suit against Hong Wan-sun, then head of the asset management division of the pension fund, for inflicting 600 billion won ($511 million) worth of damages for backing the deal. They cited how the deal was opposed by leading advisors including the Institutional Shareholder Services and Corporate Governance Service of Korea.

Meanwhile, the prosecution is zeroing in on whether the state-run pension fund was pressured by President Park Geun-hye to back Samsung in exchange for favors given to her longtime friend Choi Soon-sil, a civilian at the center of the nation’s biggest influence-peddling scandal.

The NPS’ head office in Jeonju, North Jeolla Province, as well as its regional office in Seoul, were raided. On the same day, Samsung’s future strategy office, known as the heart of the group’s operations, was also raided early in the morning. In the third round of prosecutorial raids this month, investigators also confiscated documents from the office of Choi Ji-sung, the head of the future strategy office.

Before the raids, prosecutors questioned Samsung executives including Samsung Electronics Vice Chairman Lee Jae-yong. Investigators believe the group offered 3.5 billion won to a paper company owned by Choi and her daughter Chung Yoo-ra, to fund her training. Chung is a former member of the national equestrian team.

Suspicions have been mounting over Samsung’s huge donation to two foundations set up by Choi. Samsung donated 20.4 billion won to the two organizations, the largest amount among 19 business groups.

Meanwhile, Elliott Management, via its public representative in Seoul, declined to comment on its position on the probe. 

Last month, Elliott, through its affiliates -- Blake Capital and Potter Capital -- sent a letter to Samsung Electronics’ board members to split the tech giant into holding and operating companies, and list the operating unit on the Nasdaq stock exchange. Samsung said it would communicate with the market first and give answers by the end of the month.

By Cho Chung-un (christory@heraldcorp.com)