Samsung Group’s financial affiliates, such as Samsung Life Insurance Co. and Samsung Fire & Marine Insurance Co., are planning to sell their stakes in Samsung Electronics Co. that exceed 10 percent by the end of this year. Samsung Electronics has been purchasing and cancelling its treasury shares from October 2015 as part of its shareholder friendly policy. Accordingly, the combined stake of Samsung’s financial subsidiaries in Samsung Electronics has been expected to surpass 10 percent within the year and the market has been paying attention to how they would deal with the exceeding stake.
According to financial authorities on March 6, Samsung Group’s financial affiliates recently said they would sell their stakes in Samsung Electronics that exceed 10 percent by the end of this year. An official from financial authorities said, “Since Samsung’s financial subsidiaries have been saying that they will sell their excess stakes that can be caused by Samsung Electronics’ efforts to cancel its treasury stocks, we don’t think they will be against the related law by the end of the year.”
The related law refers to the Act on the Structural Improvement of the Financial Industry that requires financial affiliates of conglomerates to obtain permission from the Financial Services Commission (FSC) in advance or sell their stakes in other affiliates when they hold more than 10 percent.
Samsung Life Insurance and Samsung Fire & Marine Insurance had an 8.23 percent stake and a 1.44 percent stake in Samsung Electronics – 9.67 percent in total – as of the end of last year. If Samsung Electronics continues to buy its treasury shares this year, the combined stake of the two companies is forecast to reach 10.3 percent by the end of the year. Samsung can request approval for 0.3 percent, the excess of the 10 percent, to the FSC but the group has decided to sell the stake. This is because it will be difficult to obtain permission as Samsung Electronics Vice Chairman Lee Jae-yong is still on trial and to avoid unnecessary public speculations as much as possible.
However, Samsung hasn’t reported to the FSC about specific plans, including when and how to sell the stake to whom. An official from the investment banking (IB) industry said, “There are still big issues like Samsung Electronics’ stock split so the group will not be able to sell the stake immediately.” Samsung also needs to decide whose stake – either Samsung Life Insurance or Samsung Fire & Marine – will sell. It is very complicated as it has to do with problems such as Samsung Life Insurance’s adoption of intermediary financial holding company system and removal of its cross-shareholding structure.
The IB and business industries point out that the financial authorities should grant permission as an exception as Samsung Group’s financial affiliates, including Samsung Life Insurance, see their stakes in Samsung Electronics surpass 10 percent unintentionally due to Samsung Electronics’ efforts to cancel its treasury stocks. Samsung Electronics is cancelling its treasury shares to return profits to its shareholders by pushing up its share prices. When the group’s financial affiliates put their stake on the market, the price of Samsung Electronics’ stocks will eventually fall because of the rise in supply. When Samsung Life Insurance sell its excess stake in Samsung Electronics, the company plans to use the money earned from the sale in its shareholder friendly policy.