A South Korean court on Tuesday denied an injunction request by a U.S. hedge fund trying to block builder Samsung C&T Corp (000830.KS) from selling treasury shares to ally KCC Corp (002380.KS), clearing another hurdle for a proposed $8 billion merger of Samsung Group [SAGR.UL] firms.

The ruling comes ahead of a July 17 Samsung C&T shareholder vote on an all-stock takeover offer from Cheil Industries Inc (028260.KS), the de facto holding company of Samsung Group. The verdict allows chemicals and construction materials firm KCC, Cheil's second-biggest shareholder, to exercise voting rights for the treasury shares.

Explaining its ruling against the request from fund Elliott Associates, the Seoul Central District Court said Samsung C&T violated no laws in selling treasury shares to KCC. With a total of around 6 percent of C&T, including the 5.8 percent stake purchase approved by the court, KCC is the Samsung construction firm's fourth-largest shareholder and will back the Cheil deal.

Elliott said in a statement after the ruling was issued that C&T's treasury sale is "wholly improper" and it plans to appeal the ruling.

The Cheil-Samsung C&T merger is seen as a key step towards a leadership transfer for the Samsung Group's founding Lee family, as it consolidates stakes in key affiliates under the Lee heirs' control. But opposition from Elliott, C&T's third-largest shareholder with a 7.1 percent stake, has led to doubts about whether Samsung C&T can muster enough support from shareholders.

C&T needs the support of at least two-thirds of the votes cast on July 17 to proceed with the deal, making KCC's voting rights important. Recent reports from two influential proxy advisors calling on C&T investors to reject the takeover offer could bolster Elliott's efforts to block the deal, a rare case of investor activism in South Korea.

Elliott had filed the injunction seeking to block Samsung C&T's stake sale to KCC in June. It has also appealed a court ruling against its other injunction request, which sought to prevent the July 17 shareholder vote for C&T investors taking place.

Samsung C&T said in a statement on Tuesday it welcomed the court's ruling and will work to convince shareholders of the merits of the proposed merger. KCC had no immediate comment.