Financial Holding Company
As the Samsung Group officially announced its conversion into a holding company on November 29, it is expected that the group will speed up the task of establishing a holding system for financial subsidiaries, another core business sector of the group. The Samsung Group's financial sector prepared a blueprint for a corporate governance structure that includes all of its financial affiliates such as Samsung Fire, Samsung Securities, Samsung Card, and Samsung Asset Management and already began to arrange stakes among affiliates on a full scale this year.
First, in January, Samsung Life purchased equities in Samsung Card, raising its stake in Samsung Card to 71.9%, becoming the largest shareholder. Samsung Life’s board of directors voted on buying treasury stocks of Samsung Securities on November 11, and finished raising its stake in Samsung Securities to 30.1%.
All of these efforts aim at meeting the conversion requirements of becoming a financial holding company. As a result, Samsung Life fulfilled all of the conditions as the largest shareholder with a stake of 30% or more (a 50% stake in an unlisted company) regarding Samsung Securities and Samsung Card, which are affiliates. As a result, Samsung Life is taking full control of Samsung Securities and Samsung Card, following Samsung Asset Management, which Samsung Life already owns a 100% stake in.
The remaining task is to secure an additional stake in Samsung Fire & Marine and lower its stake in Samsung Electronics. Currently, Samsung Life is the largest shareholder of Samsung Fire & Marine, but its stake is only 15%. In order to raise the shareholder conversion requirement to 30%, Samsung Fire & Marine should buy 15.9% of treasury stocks but it will cost more than two trillion won. It is a big financial burden. In addition, it is pointed out that Samsung Life has only 300 billion won (US$270 million) to invest in securing equities in subsidiaries under the Insurance Business Act.
Furthermore, Samsung Life’s stake in Samsung Life is a stumbling block. In order for Samsung Life to become a financial holding company, Samsung Life should be removed from its position as the largest shareholder of Samsung Electronics and its ownership should be reduced to below 5%. Currently Samsung Life is the largest shareholder of Samsung Electronics, holding a 7.6% stake. The second largest shareholder is Samsung C&T with 4.25%.
“It is true that Samsung Life’s purchase of equities in Samsung Fire and Marine Insurance or Samsung Life’s sale of its stake in Samsung Electronics is so enormous that it is difficult to implement the purchase or the sale right away,” said a representative of the Samsung Group. “However, as Samsung Electronics took its first step to become a holding company, the task to found a financial holding company will be accelerated.”