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Samsung Group to Reshuffle Biz Structure Again with Spinning-off Samsung SDS
Another Restructuring Signal
Samsung Group to Reshuffle Biz Structure Again with Spinning-off Samsung SDS
  • By Jung Suk-yee
  • June 8, 2016, 07:45
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Samsung Group shows signs of business structure reshuffle again with Samsung SDS officially announced to spin off its logistics process outsourcing business.
Samsung Group shows signs of business structure reshuffle again with Samsung SDS officially announced to spin off its logistics process outsourcing business.

 

As Samsung SDS has officially announced to spin off its logistics process outsourcing business, Samsung Group shows signs of business structure reshuffle again. The group merged Samsung C&T and Cheil Industries last year. Despite its denial, it is rumored that Samsung Group will spin off its logistics arm and merge with the general trading arm of Samsung C&T or the logistics business of Samsung Electronics.

Samsung SDS officially announced that it is considering splitting its logistics business and has reported it to the board of directors on June 7. The company said that it is to strengthen competitiveness in global logistics and focus on management capacity.

All eyes are now on what subsidiary the logistics business of Samsung SDS will be merged with. The prevailing forecast in the market is that the spin-off will be merged with the general trading arm of Samsung C&T. This is because the group can increase the corporate value of Samsung C&T, which has suffered from poor performance after the merger with Cheil Industries, by adding the logistics business.

Experts point out that this attempt of Samsung SDS to sell the profitable business unit is for Samsung Group vice chairman Lee Jae-yong, the largest shareholder of Samsung C&T, to raise his equity values through the rise in share prices and to have a firmer grip on the group. It is also a favorable factor for Samsung C&T which other shareholders see no objection to. Contrary to market expectations, however, Samsung C&T still denies the rumor, saying that it is not considering the merger with Samsung SDS.  

In regard to some views that the group seeks the spin-off of Samsung SDS in order to strengthen the control of Vice Chairman Lee, the group said, “The latest movement is to raise the substantive competitiveness of Samsung SDS, which is overvalued by reason that the group's owner family member is the largest shareholder.”

The spin-off of Samsung SDS also implies the direction of Samsung Group’s business reorganization in the future. Considering the fact that Samsung Group continues to seek a way to increase the corporate value of Samsung C&T, which serves as a de facto holding company of the group, the group can take action to improve efficiency of its construction business divisions, such as Samsung Heavy Industries and Samsung Engineering, any time, according to market watchers.

There is possibility that Samsung Group spins off the information technology (IT) service division of Samsung SDS and merges with Samsung Logitech, a logistics subsidiary of Samsung Electronics, making efforts to merge its electronics subsidiaries based on Samsung Electronics. Samsung Electro-Mechanics already spun off its non-core businesses and Samsung SDI sold its chemicals business to Lotte. Another rumor is that Samsung Group plans to combine core businesses of component subsidiaries, including Samsung Display, Samsung Electro-Mechanics and Samsung SDI, in a bid to create a synergy. In particular, it is for merging automotive component businesses of component subsidiaries.