April 28, 2024

Why did Samsung accept the split and reorganization? You may not know these reasons...

Samsung Electronics said on Tuesday that the company is considering creating a holding company during the corporate restructuring assessment process. What does this adjustment mean? Reuters has selected five key issues for interpretation: the so-called holding company is a company that holds shares in another company. Holding companies generally do not operate their own business, but are used to control different subsidiaries or subsidiaries. The South Korean government encourages local large and large companies to adopt a holding company structure because it can increase transparency and strengthen corporate governance. For example, the LG Group is also a large-scale integrated company in South Korea, and it has also established a holding company to simplify the ownership structure.

Why does Samsung have to consider restructuring?

For a long time, investors and analysts have been skeptical that Samsung Electronics may choose to spin off and turn itself into a proprietary company and an operating company, as the company is taking a series of measures to strengthen Li Zaijun and other Lee family of the Samsung Group. The heir’s control.

How to transition to the holding structure? Samsung did not clearly explain, analysts believe that Samsung may allow existing shareholders to hold shares of the ownership company and the operating company at the same time, in order to achieve the purpose of the spin-off. Samsung Holdings then issues the company’s shares to investors in exchange for equity in the operating company. This will increase the shareholding company held by the ownership company, which will facilitate the Li family and other Samsung Group subsidiaries to increase their equity in the ownership company.

Why is it split now?

US aggressive hedge fund Elliott Management holds about 0.6% of Samsung's shares. In October, it made a number of recommendations to Samsung, including spin-offs. Elliott Management believes that spin-offs can increase shareholder value. Samsung said last month that it will respond by the end of November.

What are the benefits of the new architecture for investors?

Elliott Management believes that Samsung's ownership structure is complex, and restructuring can simplify the structure, enhance corporate transparency, and add value to Samsung. Some investors believe that if the Lee family and other Samsung subsidiaries increase the shares of the ownership company, they can get more returns. Samsung’s chairman, Li Jianxi, is 74 years old. If he dies, Li Zaiyu and his two sisters need to pay billions of dollars in estate taxes. In May 2014, Li Jianxi was admitted to hospital for a heart attack and has not yet recovered his ability to act. The increase in revenue after the reorganization is also beneficial to other Samsung investors.

What are the potential obstacles?

Samsung executives said on Tuesday that moving to the holding structure needs to consider a number of potential factors, such as tax and other regulatory changes. Korean law requires that the holding company must hold at least 30% of the shares of the listed subsidiary. If it is really split, Samsung Electronics must buy shares in its subsidiaries, such as Samsung SDI, Samsung Electric, and Samsung SDS, to meet legal requirements, and spending may reach billions of dollars.

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