Samsung Electronics has announced it is looking into creating a holding unit and operating unit company structure for the global brand, a move that would create two distinct businesses. The firm is also to buy back shares from shareholders to give further power to the ruling Lee family.
The company explained that the review process examining the possible split was likely to take six months and explained that the ‘review does not indicate the management or the Board’s intention one way or another.’ Any potential split is unlikely to affect day to day operations.
Following the Note7 recall, the company faced pressure from share holding group Elliott Management who publicly called for the company to be split in the way they are now considering. Elliot Management’s billionaire founder Paul Singer is a vocal critic of the Samsung family dynasty, previously lobbying shareholders to force the family to split the businesses (he lost by a narrow margin).
A presentation to shareholders by Paul Singer in October read, ‘We believe that an appropriate resolution to the current uncertainty surrounding a possible restructuring of Samsung Electronics and its affiliates is needed. We foresee obvious sustainable benefits for all Samsung Electronics’ stakeholders of unlocking the value of Samsung Electronics’ significant treasury shareholding and forming a strong and stable corporate structure for the Samsung group, which the Samsung Electronics Value Enhancement Proposals are designed to achieve.
Like LG, Samsung is currently organised as a chaebol, a system where different arms of the company all hold shares in other arms of the business, with some arguing this system makes it harder for potential investors to work out the value of what they are purchasing.
Commenting on the plan overall, Samsung Electronics vice chairman and CEO Dr Oh-Hyun Kwon said, ‘We are committed to enhancing sustainable long-term value for our shareholders and to remaining good stewards of capital,’ he continued, “Today’s announcement extends the actions we initiated last year and represents the next phase in the evolution of our shareholder policy and governance.”
This evolution also includes plans to boost dividends for share holders while also improving capital management for investment opportunities, creating a three year holding fund with excess capital given back to share holders at the end of the cycle.