Inheritor Effects
The new Samsung C&T, which is a merged entity of Samsung C&T and Cheil Industries, is to officially launch on Sept. 1.
With the launch, the outline of “New Samsung,” which is pursued by Samsung Electronics Vice Chairman Lee Jae-yong, will solidify further. A senior official from Samsung said on Aug. 30, “The transformation of Samsung, which has been drawn up by Vice Chairman Lee Jae-yong, will be accelerated with the launch of the new Samsung C&T.”
The launch is one of the biggest turning points for the Samsung Group in terms of both hardware and software since its founding. This is because it will be the touchstone to convert to the Lee Jae-yong regime, in effect after Chairman Lee Kun-hee was hospitalized since May 2014 after suffering a heart attack.
However, economic industry sources say that he still needs to get some work done. In particular, it is crucial for him to raise his dominance of Samsung Electronics, the major subsidiary of the group. Although Vice Chairman Lee holds 16.5 percent of Samsung C&T shares, exercising his influence as the largest shareholder, he owns only 4.1 percent of Samsung Electronics, the holding company of Samsung C&T.
This is why sources inside and outside of Samsung keep bringing up the theory of Samsung Electronics’ equity spinoff. The main point of the theory is that Lee should divide Samsung Electronics into the business sector and the holding sector and merge the holding sector with Samsung C&T. Then, he can secure a considerable share of Samsung Electronics according to the ratio of the merger.
However, there is a general consensus inside Samsung that there is no need to hasten turning it into to a holding company. It is said that the stable management system, based on Vice Chairman Lee, is already set up with the merger of Samsung C&T. Another senior official of Samsung said, “It takes dozens of trillions of won to become a holding company. However, there are no reasons to push it forward, due to its invalidness.” He predicts that Vice Chairman Lee will focus more on making good business results, rather than a governance structure, for the present.
In the company’s management aspect, the top priority is expected to close down overlapping businesses. For Samsung C&T, the construction businesses overlapped, and they needed to be reorganized anyway. The resort construction sector, which is led by President Kim Bong-young, and the construction sector, which is led by President Choi Chi-hun, still overlapp for now. Also, the finance and IR sectors are reorganized.
Taken as a whole, the Samsung Group has started reorganizing the business structure of the chemistry sector again through exchanges of shares and businesses of Samsung SDI, Samsung Fine Chemicals, and Samsung BP Chemicals. Although the group denies the fact, industry sources say that the sale of Samsung Fine Chemicals is going to start soon.
Also, the merger between Samsung Heavy Industries and Samsung Engineering, which suffer from huge losses due to a slump in the global plant market caused by low oil prices, can be pushed ahead again any time. The two companies announced that they can turn over 40 trillion won (US$33.98 billion) by 2020, while pushing forward the merger last year. In particular, both companies can save 100 billion won (US$84.96 million) every year by doing integrated procurement, as they have many overlapping factors in terms of materials purchases, creating a great synergy effect from the merger.
Recently, some directors and employees at the Samsung Group's Future Strategy Office and Samsung C&T are studying hard about the biotechnology business. It shows Vice Chairman Lee's great interest in biotechnology.
Samsung C&T has announced that it will increase sales in the biotechnology sector to 1.8 trillion won (US$1.53 billion) by 2020, and Samsung BioEpis is planning to list the NASDAQ within the first half of next year. The company will make a huge investment by raising US$1 billion (1.18 trillion won) through the listing.