Samsung Electronics may consider split: report

28 Nov 2016

South Korean electronics giant Samsung Electronics Co Ltd is reported to be considering a split into two separate companies as proposed by US activist hedge fund Elliott Management, Seoul Economic Daily reported today citing unnamed source.

The hedge fund wants Samsung Electronics to divide into a holding company and an operating company, pay $26 billion as special dividend and pledge to return at least 75 per cent of free cash flow to investors besides appointing some independent directors.

While neither Samsung or the Lee family that owns a major stake in the Samsung Group have commented on restructuring plans, the conglomerate has revived reorganisation plans after Jay Y Lee took over the reins from his father and Samsung patriarch Lee Kun-hee, who was incapacitated following a May 2014 heart attack.

The move, coming in the wake of the grievous setback to its once thriving smart phone business with the failure of its latest Samsung Note 7 series smart phone, would also allow the heirs of the founding Lee family to strengthen their grip on the electronics giant, the crown jewel of the Samsung Group.

The hedge fund wants Samsung Electronics to divide into a holding vehicle for ownership purposes and an operating company, pay a $26 billion special dividend, pledge to return at least 75 per cent of free cash flow to investors and agree to appoint some independent directors.

Neither the Lee family nor Samsung Group have commented on restructuring plans, but the conglomerate's reorganisation efforts have accelerated since Jay Y. Lee took over the reins after his father and Samsung patriarch Lee Kun-hee was incapacitated following a May 2014 heart attack.

Samsung's board of directors are meeting tomorrow and a response to the Elliott proposals is expected then, the newspaper said.

Meanwhile, the Korea Exchange separately asked Samsung to comment by 6 pm (0900 GMT) on whether it planned a spinoff.

The company is did not immediately comment on the newspaper report.

"Even if Samsung Electronics does not comment on specifics such as the timing of a split ... the firm will at least say it will implement ownership structure changes in a reasonable manner," HI Investment said in a report on Monday.

Samsung has been working on streamlining its business and getting rid of the assets which are either showing signs of slow growth or lower-than-expected sales. It has already sold off its printer division to Hewlett-Packard for $1.05 billion and is now looking to hand over its struggling PC business to the leader in the said industry - Lenovo. Thus, the largest South Korean conglomerate is looking to establish a stable transfer of power to the next members of the founding family.