SEOUL, Nov. 9 (Korea Bizwire) – South Korean tech behemoth Samsung Group’s governance structure has been simplified by a series of mergers and asset sales, industry watchers said Monday, with the owner family solidifying its grip over the country’s No. 1 conglomerate.
Samsung C&T Corp. was created in September as the group’s holding firm, which came out of the merger between then-Samsung C&T and fashion arm Cheil Industries. With the merger, the group’s cross-shareholding linkages were reduced to seven from the previous 10, according to the data compiled by business tracker Chaebul.com.’
The changes in Samsung’s governance structure also solidified the owner family’s control of Samsung Electronics Co., one of the key units of the conglomerate.
The launch of the new Samsung C&T is considered by market watchers a significant step forward for the controlling Lee family since it will give a boost to the generational leadership transfer to Lee Jae-yong, the only son of the group’s patriarch Lee Kun-hee, who has been hospitalized since May 2014.
Jae-yong holds a 16.4 percent stake in Samsung C&T, with his two sisters — Boo-jin and Seo-hyun — each holding 5.47 percent. Kun-hee also takes up a 2.84 percent stake in the de facto holding firm.
Industry watchers said the merger also created the possibilities for Samsung Group to simplify its management structure further.
The cross-shareholding web can be completely terminated if Samsung Electro-Mechanics Co., an equipment-making arm; Samsung SDI Co., the battery-making unit; and Samsung Fire & Marine Insurance Co. sell their 2.61 percent, 4.73 percent and 1.37 percent stakes in Samsung C&T.
But the linkages could be severed through stock buybacks to maintain the management, which will cost 2.43 trillion won (US$2.1 billion) to purchase shares from the three arms.
South Korea’s Fair Trade Commission said it has commenced investigations to review if Samsung Group violated any local financial rules regarding corporate governance structures.
The current rules stipulate that conglomerates should not make an additional cross-shareholding, nor strengthen the existing web. Any new managerial link must be eliminated within six months.
But exceptions are also accepted if the changes were driven by a merger between closely linked affiliates.