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No Holding Company Move Signalled By Samsung Electronics For Now

No Holding Company Move Signalled By Samsung Electronics For Now
While rejecting U.S. activist hedge fund Elliott Management's proposal and ruling out for now a long-anticipated succession move, Samsung would find it difficult to adopt a holding company structure at this time,, the South Korean conglomerate - Samsung Electronics Co Ltd said on Friday.
Eve as the founding Lee family tries to solidify its control of the Samsung Group flagship ahead of a leadership succession, a large section of investors had expected the global leader in smartphones and memory chips to adopt a holding company structure.
Amid a political scandal that has embroiled Samsung Group [SAGR.UL] chief Jay Y. Lee, the investors were presented with their first insight into how the South Korean tech giant is approaching a potential restructuring by the Chief Executive Kwon Oh-hyun who told the annual shareholder meeting this was unlikely at this stage.
"There are negative effects that would arise from transitioning to a holding company so it does not appear it will be easy to do so at present," Kwon said, without elaborating what those negatives were.
The shares of Samsung C&T Corp went down nearly 7 percent by the comments that were made. N the eventuality of Samsung Electronics adopting a holding structure, being a Samsung Group's de facto holding company, it was being viewed as a likely beneficiary.
As the final succession step, C&T, which they firmly control, would be merged with the Samsung Electronics holding company by Samsung's Lee family members, would be merged some analysts believed.
"Investors have been hoping for change for Samsung Electronics and more broadly Samsung Group, but this suggests that process will be delayed," said CJ Heo, a fund manager at Alpha Asset Management.
By splitting itself in two and paying out a 30 trillion won ($26.75 billion) special dividend, Elliott called for the firm to adopt a holding company structure in October.
Samsung has until now has maintained a neutral stance on the holding structure issue even though it had announced a review in November.
An Elliott spokesman declined to comment.
In a corruption scandal that has already led to the removal of President Park Geun-hye from office, Lee was arrested on charges of bribery, embezzlement and other offences and some investors said that the mooted restructuring appears to have been delayed by that arrest and the entire incident.
While Lee denies the allegations, more than 20 years in prison could be in the fate of the 48-year-old leader of Samsung Group and Samsung Electronics' vice chairman.
Following a May 2014 heart attack, Samsung Group patriarch Lee Kun-hee remains incapacitated. Therefore an impetus to quickly strengthen their grip on key affiliates such as Samsung Electronics is provided by the fact that his children face a multi-billion dollar inheritance tax when he dies.
A restructuring could streamline the company, improve its governance and boost its value, investors believe.

Christopher J. Mitchell

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