Samsung's Restructuring Plan Faces Challenges
March 23 2017 - 11:13PM
Dow Jones News
By Timothy W. Martin
SEOUL-- Samsung Electronics Co.'s chief executive said Friday
that officials see challenges in restructuring the sprawling
Samsung conglomerate, with a continuing review revealing "adverse
implications" to switching to a holding-company structure.
The remarks by Kwon Oh-hyun, made at Samsung Electronics' annual
shareholders' meeting on Friday, cooled expectations that the
sprawling South Korean conglomerate, which includes the world's
largest smartphone maker, would reach a swift conclusion over how
to restructure itself.
Samsung, South Korea's largest family-run conglomerate with 60
affiliates, has come under criticism by regulators, foreign
investors and corporate governance advocates for being too opaque
and complex. In November, Samsung said it had hired external
consultants to advise on the possibility of the creation of a
holding-company structure with a potential listing overseas. It
cautioned then that the process would take at least six months.
But on Friday, Mr. Kwon, who is also a Samsung Electronics vice
chairman, signaled a decision wasn't imminent, adding the company
would continue to review "all of the options from multiple
perspectives, including legal, tax and strategic aspects."
Shares of Samsung Electronics fell 1%, while Samsung C&T
Corp., which is expected to become Samsung's holding company in a
broader restructuring, tumbled 6.6%. Samsung SDS Co., another key
affiliate, dropped 7.1%, as the broader Kospi composite index
slipped 0.3%.
In recent months, South Korea's large conglomerates, known as
"chaebols, " have fallen into the crosshairs of a continuing
bribery scandal that has rocked the nation and ratcheted up public
anger toward companies including Samsung. The leading contenders
for a snap presidential election set for May hail from opposition
parties, and have vowed to overhaul chaebols.
Samsung's de factor leader, Lee Jae-yong, has been imprisoned
for his alleged role in the scandal. Mr. Lee has denied wrongdoing
and his trial is in the early stages with the judge's decision
expected by May.
The pushback against Samsung's tangled web of ownership isn't
coming from just within South Korea. Elliott Management Corp., a
U.S. activist hedge fund founded by Paul Singer, sent a letter to
Samsung in October, outlining ways for the Samsung conglomerate to
adopt a holding-company structure and list its shares in New York
and Seoul.
One such approach proposed by Elliott would split up Samsung
Electronics into a holding company that merges with Samsung C&T
to manage the conglomerate's stakes in other affiliates, as well as
an operating company focused on selling smartphones, televisions
and memory chips. The operations company would be listed in New
York, under Elliott's plan.
But Mr. Kwon suggested Friday that moving to a holding-company
structure would be difficult.
"Our progress to date has revealed certain adverse implications
in such a transition, and at this point, we see challenges in
implementing a holding-company structure," he said.
Mr. Kwon said that Samsung would share the results of its review
with shareholders when it is completed.
An Elliott spokesman declined to comment.
Write to Timothy W. Martin at timothy.martin@wsj.com
(END) Dow Jones Newswires
March 23, 2017 23:58 ET (03:58 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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