Samsung’s Holding Company to Go Public, Easing Succession Process; Samsung Everland’s IPO Is Seen as Key to Power Transfer Within Conglomerate’s Founding Lee Family

June 11, 2014 Leave a comment

Samsung’s Holding Company to Go Public, Easing Succession Process

Samsung Everland’s IPO Is Seen as Key to Power Transfer Within Conglomerate’s Founding Lee Family

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MIN-JEONG LEE

June 2, 2014 9:48 p.m. ET

SEOUL—Samsung Everland Inc., the de facto holding company of South Korea’s largest conglomerate, Samsung Group, is planning to list by the first quarter of 2015, in a move widely seen as key to a transfer of power within Samsung’s founding Lee family.

Samsung Chairman Lee Kun-hee, his son and two daughters own a combined 45.6% in Samsung Everland, a company with a complex portfolio of holdings in other Samsung Group affiliates. One of the most important of those holdings is a 7.6% stake—through another affiliate—in Samsung Electronics Co. 005930.SE +1.03% , the world’s biggest smartphone and TV maker, and the jewel of the Samsung Group.

Although it is still unclear what the Lee family members will do with their holdings in Samsung Everland, analysts say that the younger Lees could use proceeds from share sales following the initial public offering to buy stakes in other group companies, in order to consolidate their control over pieces of the conglomerate.

They could also use the money to help pay a tax of up to 50% levied on assets they inherit from the elder Mr. Lee, who has been hospitalized since early May when he underwent surgery after a heart attack. The elder Mr. Lee has control over more than 70 Samsung affiliates through a complex web of cross-shareholdings, including a 3.7% stake in Samsung Everland.

Samsung Everland, which operates an amusement park and runs a fashion business, said in a statement that the IPO would help the company raise capital to expand overseas. The company and Samsung Group declined to comment on how the IPO would affect the succession of power at the conglomerate.

Mr. Lee’s son, Jay Y. Lee, who is currently vice chairman of Samsung Electronics without an operational title, is the largest shareholder of Samsung Everland with a 25.1% stake as of the end March. Mr. Lee’s two daughters each hold an 8.4% stake in Samsung Everland.

News of the Samsung Everland IPO has intensified speculation among analysts and Samsung-watchers that the conglomerate is preparing for a shuffling of assets to shift power to a new generation of family leadership. Though Samsung says the elder Mr. Lee has regained consciousness, it is unclear whether he can still be involved in key group decisions.

In early May, the group’s information technology unit, Samsung SDS Co., also said it plans to go public in what could be one of the biggest share sales in South Korea this year.

How best to pass the elder Mr. Lee’s holdings to his children has been a thorny subject for the Lee family. Kiwoom Securities analyst Park Joong-sun estimates that Mr. Lee’s children could be liable for up to 6 trillion won ($5.86 billion) in inheritance tax on the transfer of his shares in just three companies: the 3.4% stake in Samsung Electronics, a 20.8% stake in Samsung Life and a 1.4% stake inSamsung C&T Corp. 000830.SE +4.66%

It is unclear how much the Samsung Everland IPO could raise, though brokers estimate each share could be worth at least 2 million won. In the most recent deal involving Samsung Everland stock, in 2011, the company’s shares were sold at 1.82 million won each, giving Samsung Everland a valuation of 4.55 trillion won based on 2.5 million shares outstanding.

Samsung Everland plans to hire bankers within the month and plans to list in Seoul by the first quarter of 2015 at the latest, a company spokesman said Tuesday.

 

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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