Joyce Lee and Se Young Lee Seoul
SAMSUNG Group’s de facto holding company yesterday sought another cornerstone as it reconstructs South Korea’s biggest conglomerate to smooth the path for management succession, offering more than $8 billion (R96bn) to buy an affiliate with a key stake in flagship firm Samsung Electronics.
Cheil Industries, with interests from construction to fashion, is offering new stock priced at about 8.9 trillion won (R97bn) to buy building firm Samsung C&T.
After recent market jitters on Samsung’s overhaul, shares in both rose nearly 15 percent – taking Samsung C&T’s value beyond the offer price to about 10 trillion won.
Top shareholder
The move combines what analysts consider two key companies in the sprawling family-controlled conglomerate. It would also cement the position of heir-apparent and Samsung Electronics vice-chairman Jay Y Lee, likely to remain top shareholder of the merged entity, as Samsung prepares for the eventual transfer of control from ailing patriarch Lee Kun-hee to his children.
Samsung C&T’s 4.06 percent stake in Samsung Electronics, worth nearly $8bn at current market prices, makes it the third-largest investor in the tech giant after South Korea’s National Pension Service and Samsung Life Insurance.
“There will be a solidification of the ownership structure with Jay Y clearly being the largest shareholder,” a person familiar with Samsung strategy said. The person said the merger was consistent with changes over the past 12 months as Samsung sought a smooth transfer of control from the senior Lee, hospitalised since a heart attack last year.
The latest move still needs to be approved by shareholders and is not likely to be the last in the group’s revamp, which has not been without hitches. In November, Samsung Heavy Industries scrapped a $2.5bn takeover of Samsung Engineering due to shareholder opposition.
Under the agreed deal, Cheil is offering 0.35 new Cheil shares, issued at a fixed price, for each Samsung C&T share in a deal that values the target at 8.9 trillion won.
Inheritance tax
Amid yesterday’s share price surge, some in Seoul said shareholder approval was not a foregone conclusion.
“Some shareholders that believe that Samsung C&T prices are undervalued… could oppose the deal,” said Baek Kwang-jae, a construction analyst at Kyobo Securities. “However, if the share prices continue to rise sharply, shareholders may agree on the merger.”
If the deal goes through, other issues Samsung still has to resolve include inheritance tax if Lee Kun-hee multibillion-dollar stakes in Samsung Electronics – 3.38 percent – or Samsung Life Insurance – 20.76 percent – are passed on to his heirs. – Reuters