Emerging Hurdles
It is said that the Samsung Group is making a change in its corporate governance structure with Samsung Electronics, Samsung C&T and Samsung Life Insurance having moved to new offices and shares of Samsung C&T and Samsung Engineering having been purchased by Samsung Electronics vice chairman Lee Jae-yong early this year. The governance structure issue, which was laid to rest for a while, has emerged again in the wake of the vice chairman’s recent meetings with the CEOs of some financial companies, which is being regarded as having to do with the Samsung Group’s attempt to turn Samsung Life Insurance into a financial holding company.
Under the circumstances, securities companies are coming up with various scenarios regarding the issue and investors are getting more and more interested in it. Samsung Life Insurance, which is at the center of the issue, lost 9.09% of its stock price on April 18. This implies the Samsung Group’s corporate governance reform based on Samsung Life Insurance’s conversion to a financial holding company is rather unlikely to be realized for the time being.
Most stock market experts are predicting that the structural reorganization will go through two steps. According to them, Samsung Life Insurance is likely to have less control on Samsung Electronics and more control on the group’s banking subsidiaries than before through the conversion while the life insurance company is divided into investment and business arms and the financial holding company becomes the owner of the business arm, Samsung Fire & Marine Insurance and the other financial companies in the group.
According to another scenario, de facto holding company Samsung C&T and the investment arm of Samsung Electronics are likely to be merged with each other after Samsung Electronics’ spin-off. In this scenario, Samsung Electronics’ spin-off is highly likely because Samsung Electronics has a large market cap and it is not easy for the share ratio in Samsung Electronics to be increased. Samsung C&T is expected to be able to buy shares of the investment arm of Samsung Electronics by making use of the shares of the financial holding company.
“Once the intermediate financial holding company bill is passed by the National Assembly, a merger between Samsung C&T and the investment arm of Samsung Electronics is likely to follow so that Samsung C&T can shore up its control by having sufficient shares in most of the group’s subsidiaries including the financial holding company and the business arm of Samsung Electronics,” said research analyst Lee Sang-heon at Hi Investment & Securities.
The Samsung Group is currently waiting for the issue to subside. An insider in the group recently made a comment that securities companies’ predictions are ill-founded and do not fit into existing law because the amendments to the act on separation between banking and industrial capitals and the part of the Fair Trade Act regarding intermediate financial holding companies are unlikely to be passed by the 20th National Assembly with opposition parties being opposed to the amendments.