Activist Offers 45% Premium for Samsung Affiliates’ S-1 Stakes

Activist investor Flashlight Capital offered to buy a combined 20.6% stake in South Korea’s S-1 Corp from five Samsung affiliates at 116,000 won per share, a 45% premium that values the proposal at about KRW906.6 billion. The Singapore-based firm set a response deadline of Sept. 23 for the affiliates.

The offer targets shares held by Samsung SDI, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung Securities and Samsung Card. Regulatory filings show Samsung SDI owns about 11.03% of S-1 and Samsung Life holds roughly 5.34%. Flashlight itself owns under 5% of S-1 and also holds stakes in each of the five Samsung affiliates.

S-1’s stock rose as much as 11% to 89,000 won after the proposal was announced, before trimming most gains to trade about 3% higher. The proposed price of 116,000 won is above S-1’s previous record closing price of 115,000 won set in July 2016.

Flashlight delivered the offer directly to the affiliates’ boards in what is commonly described as a “bear hug,” an unsolicited, high-premium proposal intended to press directors to consider the bid. The firm wrote that the five Samsung affiliates have “little strategic justification for continuing to own S-1,” pointing to Samsung SDI’s focus on the capital-intensive battery business and regulatory limits on cross-shareholdings that affect the four financial companies.

The investor argued that selling the S-1 stakes would allow the affiliates to redeploy capital into their core businesses or return cash to shareholders. Flashlight also indicated the proposal could test recent revisions to South Korea’s Commercial Act, which expanded directors’ fiduciary duties to cover the interests of all shareholders rather than primarily those of controlling owners. The legal changes have backing from President Lee Jae Myung.

Executives at S-1 and the five Samsung affiliates did not immediately respond to requests for comment. The Sept. 23 deadline gives the affiliates a limited window to accept, negotiate or reject the offer.