Restructuring Accelerated
Samsung Heavy Industries and Samsung Engineering are merging to become a super-large plant company. The merger is expected to mark the end of the subsidiary reorganization of the Samsung Group that started last year, with only the reshaping Samsung C&T, the construction arm, remaining.
Samsung Heavy Industries and Samsung Engineering voted for the merger at an exchange ratio of 1:2.36 at the board of directors meeting on Sept. 1. The former will issue new shares, and 2.36 shares will be delivered to Samsung Engineering stockholders per one Samsung Engineering share. The two companies are going to hold an extraordinary shareholder meeting on October 27 before wrapping up the merger process on Dec. 1.
The new company is expected to have annual sales of 25 trillion won (US$24.6 billion) along with market capitalization of approximately 9 trillion won (US$8.8 billion). The Samsung Group is planning to boost its yearly sales to at least 40 trillion won (US$39.3 billion) by 2020.
The decision on the merger is based on the judgment that synergy effects can be maximized and business can be diversified. Samsung Heavy Industries is currently distinguishing itself in the global offshore plant industry, while Samsung Engineering is showing excellent performance in power generation and water treatment as well as the onshore petrochemical plant sectors.
The merger has been anticipated to increase business efficiency for quite a while. Samsung Engineering recorded operating losses of over 1 trillion won (US$982 million) last year, and Samsung Heavy Industries posted large losses in the first half of this year as well.