For Financial Holding Company
Samsung Life Insurance Co. has decided to buy an 8.02 percent stake in Samsung Securities Co. owned by Samsung Fire & Marine Insurance Co. on August 18 in order to lay the foundation to transition into a financial holding company.
According to financial industry sources, Samsung Life Insurance held a board meeting at 4 pm on the same day and made a decision to purchase Samsung Securities stakes held by Samsung Fire. As a result, Samsung Life's stake in Samsung Securities will rise from 11.4 percent to 19.16 percent. The deal will worth 234 billion won (US$210.72 million) when calculating based on the closing price of Samsung Securities worth 38,200 won (US$34.40) on the same day.
The move is thought to be part of Samsung Group’s plans to reorganize its business and establish Samsung Life as the intermediate financial holding company. Samsung currently restructures its three main businesses to bio, electronics and financial sectors. For the financial sector, the group is increasing stakes in financial units based on Samsung Life. In particular, Samsung Group plans to turn Samsung Life into the financial holding company when the law on intermediate financial holding companies passes. Under local regulations, a financial holdings firm must be the largest shareholder with more than 30 percent of listed financial subsidiaries. For unlisted affiliates, the minimum stake is 50 percent.
Accordingly, Samsung Life purchased the whole 37.45 percent stake, or 43.39 million shares, of Samsung Card held by Samsung Electronics earlier this year, becoming the largest shareholder of the credit card company with 71.86 percent. The deal was to arrange the stakes between the financial and electronics units and to meet the regulatory requirement of becoming a financial holding company at the same time. Since 2013, Samsung Life has acquired Samsung Card’s stakes from Samsung Electro-Mechanics, Samsung C&T and Samsung Heavy Industries and finalized it with the large-scale deal with Samsung Electronics. In addition, the company has met the requirement to become a holding company of unlisted affiliates, including Samsung Asset Management and Samsung SRA Asset Management, by securing the 100 percent stakes.
Currently, Samsung Life hasn’t met the requirement to become a holding company of only Samsung Securities and Samsung Fire among Samsung Group’s financial affiliates. Although Samsung Life is the largest shareholder of Samsung Securities, it hasn’t secured a 30 percent stake yet. Accordingly, it is expected to purchase additional stakes in the future. Samsung Life is also the largest shareholder of Samsung Fire but has only a 15 percent stake. However, the company will come up with various alternatives as it costs a lot to buy Samsung Fire’s stakes. Furthermore, Samsung Life should find the way to dispose a 7.21 percent stake in Samsung Electronics, another requirement to become an intermediate financial holding company.
An official from the financial industry said, “It will take a long time to come up with the measures to raise funds to acquire Samsung Fire’s stakes and lower Samsung Electronics’ stakes.”