Samsung Succession Shakeup

Lee Jae-yong, Lee Seo-hyeon, and Lee Bu-jin, the joint inheritors of Samsung Group.
Lee Jae-yong, Lee Seo-hyeon, and Lee Bu-jin, the joint inheritors of Samsung Group.

 

Keen attention is being paid to the succession of the Samsung Group, with the adjustment of the subsidiary and shareholding structures accelerating for reorganization of ownership. The group has recently affirmed that the business adjustment as of late is only for higher corporate efficiency, but experts have a different consensus.

The most likely scenario is the establishment of a holding company led by Samsung Everland for the independence of the three sons and daughters of Chairman Lee Kun-hee through subsidiary spin-offs. At present, Samsung Everland, the de facto holding company of the Samsung Group, owns 19.3 percent of Samsung Life Insurance, and Samsung Life Insurance in turn owns 7.6 percent of Samsung Electronics.

This means that all three siblings who will lead the Samsung Group in the future are in Samsung Everland in the form of equity ownership, business participation, etc. Samsung Electronics Vice Chairman Lee Jae-yong is the largest stockholder of Samsung Everland with 25 percent of its shares; and Hotel Shilla President Lee Bu-jin and Cheil Worldwide President Lee Seo-hyeon have 8.37 percent of itsshares each, too.

It was expected that the eldest son would be in charge of the electronics and financial arms of the group, while President Lee Bu-jin takes the hotel, construction and heavy chemical subsidiaries and President Lee Seo-hyeon takes charge of the fashion and advertising businesses once the third-generation ownership is put in place. It was in this context that Samsung Everland acquired the fashion business unit of Cheil Industries and divided the food and beverage business into Samsung Welstory in September last year.

However, more recently, this scenario has begun to show some signs of change when Samsung General Chemicals and Samsung Petrochemical merged earlier this month. The shareholding ratio of President Lee Bu-jin, who used to be the largest stockholder of Samsung Petrochemical, fell from 33.2 percent to 4.91 percent through the merger, whereas Samsung C&T took first place with 33.99 percent shares, followed by the electronics subsidiaries of Samsung Techwin (22.56 percent), Samsung SDI (9.08 percent), Samsung Electro-Mechanics (8.91 percent), and Samsung Electronics (5.28 percent). Under the circumstances, the vice chairman is expected to get the chemical business division as well as electronics.

Nonetheless, it is also said that her influence on the petrochemical business of the Samsung Group is still high, because she remains the largest individual shareholder of the merged corporation. She is considered to have established a bridgehead to Samsung Total, the largest petrochemical affiliate in the group, by means of her shares in the corporation as well.

The appointment of a new owner of the construction arm, which will be the highlight of business reorganization, is beyond prediction for now, too. Samsung SDI acquired Cheil Industries late last month to become the largest stockholder of Samsung C&T and Samsung Engineering, the two pillars of the group’s construction business. With Samsung Engineering shares of Samsung SDI having been handed over to Samsung C&T last year, Samsung C&T becomes the largest shareholder of Samsung Engineering with 20.91 percent shares. This will happen once the Samsung Engineering shares acquired through the merger with Cheil Industries are transferred to Samsung C&T, and then ownership takes the shape of Samsung Electronics-Samsung SDI-Samsung C&T-Samsung Engineering. This implies the construction segment, which was regarded to end up in the hands of Lee Bu-jin, will fall under Lee Jae-yong.

In short, the succession process is likely to take concrete shape, as the owners of the construction and chemical divisions are fixed. This is why Samsung C&T is in the limelight these days. The company is considered to hold the key to the reshaping of both segments in that the new owner of the company will take control of both the construction and the chemical divisions.

“Samsung C&T has emerged as the center of the discussions of succession through the recent business reorganization,” an industry source explained, continuing, “It seems that the one who controls Samsung C&T will be the biggest beneficiary.”

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