Samsung SDI has sold off its 4.04 million shares in Samsung C&T, removing three of the seven remaining cross shareholding links among Samsung Group affiliates.
The company announced on April 10 that it sold its 2.1 percent stake in Samsung C&T to domestic and foreign investors through a block deal.
The total sales price was 559.9 billion won, meaning that each share was sold for 138,500 won, a 3.8 percent discount from the closing price of 144,000 won.
The block deal was managed by City Securities and Credit Suisse (CS) Securities. Samsung family members, including Lee Jae-yong, vice chairman of Samsung Electronics, and Samsung subsidiaries did not participate in the stock deal.
Samsung SDI said the company would use the proceeds from the stake sale as investment resources.
Samsung SDI's stake sale followed the Fair Trade Commission (FTC)'s instruction in February that it dispose of its entire shareholdings in Samsung C&T by August. The FTC said Samsung Group subsidiaries should remove all of the remaining seven cross shareholding links.
With Samsung SDI’s disposal of its Samsung C&T stake, the three circular shareholding links among Samsung Life Insurance, Samsung Electronics, Samsung SDI and Samsung C&T have fallen apart.
The remaining four links can be eliminated if Samsung C&T stocks held by Samsung Electro-Mechanics and Samsung Fire and Marine Insurance are sold off. Samsung Group is expected to push for the sale of Samsung C&T stocks held by the two affiliates to remove the remaining links.
In 2015, Samsung told the FTC that it would get rid of all of its remaining cross shareholding arrangements. The securities industry estimates that Samsung will need about 1.6 trillion won to eliminate circular shareholdings.
But the sale of Samsung C&T stakes held by Samsung Electro-Mechanics and Samsung Fire and Marine Insurance does not cut off all the equity ties among Samsung units.
Currently, Samsung’s financial affiliates hold substantial stakes in the group’s non-financial subsidiaries. Chaebol critics argue that corporate governance reform would not be completed unless these equity ties are severed.
Currently, Samsung Life Insurance holds 8.27% of Samsung Electronics shares as part of its assets. Samsung Fire & Marine Insurance also owns 1.45% of the electronics giant.
Under the Financial Industry Restructuring Act, Samsung financial affiliates’ combined equities in Samsung Electronics should not exceed 10%.
Current shareholders of Samsung Electronics are enjoying an increase in their equity share following the company’s recent cancellation of treasury stocks. After treasury stocks are canceled, Samsung Life’s and Samsung Fire & Marine's stakes in Samsung Electronics are expected to add up to 10.43%. Accordingly, Samsung financial affiliates should sell excess shareholdings.