Where the 300 billion won (US$250.52 million), which is raised to buy shares of Samsung Engineering by Lee Jae-yong, Samsung Electronics Vice Chairman and the heir of Samsung Group, with the sale of Samsung SDS shares he owned, will finally go into is attracting attention.
According to business and securities industry sources on February 10, Samsung Engineering disclosed that it will issue 156 million new shares with each priced at 8,110 won (US$6.77). Twenty percent of the shares will be assigned to the employee stockholders association first and the 3.37 shares per share will be assigned to the remaining shareholders.
The subscription period for the paid-in capital increase will be February 11 to 12. When shares are forfeited in the process, Vice Chairman Lee Jae-yong can participate in the public subscription, which is scheduled to take place on February 15 to 16.
At the time when Vice Chairman Lee Jae-yong sold his 2.05 percent share in Samsung SDS at the end of last month, a Samsung spokesperson said, “Vice Chairman is seeking to sell Samsung SDS shares he owns to raise funds to take part in the public subscription when share are forfeited in the process to increase capital by issuing new stocks of Samsung Engineering.” However, shares are unlikely to be forfeited at the moment.
Given that Samsung Engineering ended at 11,100 won (US$9.19) on February 5, there is no reason shareholders not to subscribe to new shares since they can make profits of 35 percent. Moreover, existing shareholders can subscribe to 20 percent higher new shares than their assigned shares so the paid-in capital increase can be completed even when some shareholders don’t participate in the capital increase.
If its shares are rarely forfeited in the process of the capital increase of Samsung Engineering, Vice Chairman Lee Jae-yong cannot use his 300 billion won (US$250.52 million). Securities industry sources forecast that the money will be used to buy shares in order to remove cross shareholding ties of Samsung C&T Corp.
The Korea Fair Trade Commission said Samsung Group must weaken or break its circular shareholding chains, which it deemed had been strengthened by a merger of Cheil Industries and Samsung C&T at the end of last year, by selling a 2.6 percent stake, or 5 million shares, in Samsung C&T owned by Samsung SDI.
The deadline is March 1, six months after a new entity formed by a merger between Samsung C&T and Cheil Industries was launched on September 1 last year. Samsung Group asked the regulator for an extension on the sale deadline but its request got rejected.
Now, there are only 20 days left. When the stock price of Samsung C&T slides once again due to the overhang issues, the company is expected to face an angry backlash from shareholders. At the time when Samsung C&T and Cheil Industries merged, Samsung C&T said it will maximize the shareholder value.
Accordingly, market sources say that Samsung SDI’s stakes in Samsung C&T are highly likely to be a block deal to not only institutions at home and abroad but also Vice Chairman Lee Jae-yong. This is because it is the best way for Samsung C&T to maximize the shareholder value when Vice Chairman Lee Jae-yong buys the shares.
Considering the fact that 5 million shares in Samsung C&T are worth 749.7 billion won (US$626.05 million), based on 152,000 won (US$126.93) of the closing levels on February 5, Vice Chairman Lee can purchase up to 1 percent of the shares in Samsung C&T.