Samsung Affirms an Unprecedented Structural Overhauling – Simplifying the Ownership Structure


Samsung Electronics stated today that it was considering a major overhauling in its structure, towards a holding company one.

The move has long been expected from the company, as the next step taken by the Lee family heirs, the founders of the company.

Samsung Electronics

Major Overhaul

Samsung is one of the world’s top makers of smartphones as well as televisions and memory chips. The company has claimed that it is quite neutral regarding the step, which will be a major overhaul for the huge conglomerate. Samsung has hired some advisers for assisting it in this move. However, many analysts have already expected this, as it seems the logical step to be taken by the Lee family. The step is only to be expected if the founding family wishes to have stability in its control over the huge business.

No Decision

The company has not taken any decision as yet, as the review by the analysts has not indicated the intention of the board or the management in either way. The decision would probably take about six months more. Elliott Management, an activist of hedge fund in the US had called for a split in the company in October. The call was made for splitting the company and transforming into a holding company, for the sake of ownership and for boosting the returns for shareholders.

Simplifying the Structure

According to investors, Samsung shares are trading at deep valuation discounts, compared to its peers on a global scale. This is because of the complexity in its ownership structure and also because of the poor corporate governing and inefficiency in managing cash. Samsung has not directly addressed the proposals of the fun today, though it has stated earlier that proper consideration would be given to the fund and a decision would be taken by the end of this month.

Boosting Control

According to several analysts as well as investors, the split can offer the perfect opportunity for Jay Y. Lee, the scion of the founding Lee family, and his sisters for boosting control of the Samsung Group, which is the biggest conglomerate in South Korea.

Deal Structure

There is no word from Samsung executives regarding the deal structures resulting from this upcoming overhaul. However, investors feel that the Lee family and the affiliates of the Samsung Group will exchange the operating shares of the company in return for the holding firm stocks, thereby strengthening their control.


No Surprise for Investors

According to investors, shareholders will get more capital from Samsung Electronics and this will enhance the earnings of the Group as well as the Lee family. The heirs of the Lee family now face an inheritance tax to the tune of several billions of dollars in case Lee Kun hee, the patriarch of the Group who is now 74 years old, passes away. Lee Kun hee is presently in hospital from the month of May 2014 due to heart attack. According to Park Jung hoon, who is the fund manager for HDC Assets, Samsung’s statement does not come as much of a surprise, as investors were already aware of it and expecting the structural overhauling.

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