Samsung IPOs to finance Lee’s succession plans

Samsung IPOs to finance Lee’s succession plans

Wednesday, Jun 04, 2014

Park Hyong-ki and Kim Young-won

The Korea Herald/Asia News Network

The planned initial public offerings of Samsung Everland and Samsung SDS will allow Samsung Group chairman Lee Kun-hee’s three children to secure capital worth some 5 trillion won ($4.9 billion) to inherit wealth and ownership of Lee’s business empire.

Samsung Everland, the de facto holding company of the group, said Tuesday that it would go public by early next year, a widely expected move by the market following the announcement of Samsung SDS’ stock flotation plan last month.

The market has been expecting the group to further accelerate the equity restructuring of its affiliates as Lee remains hospitalized and unconscious after receiving heart treatment.

“The IPO of Korea’s largest theme park can also be seen as part of steps to simplify the group’s complex equity ties, and transform the group into a holding company with financial units under an intermediate holding company,” analysts said.

Samsung vice chairman Lee Jay-yong is expected to hold a controlling interest in the envisioned holding company that would line up Samsung’s electronics, construction, and theme park and resort businesses, they said.

The funds raised via the IPOs would pave the way for Lee’s children, especially his son Jay-yong, to pay for taxes after inheriting the chairman’s crucial shares in Samsung Electronics and Samsung Life Insurance worth some 12 trillion won.

Lee’s 20 per cent stake in Samsung Life will be the key to allowing Jay-yong to maintain control over the group’s electronics and financial units, which he will lead, as the insurance company’s equity ties expand from Samsung Everland and Samsung Electronics to Samsung Card through a complex web of cross-shareholdings.

Chairman Lee has less than a 4 per cent stake in Samsung Electronics, but he is the owner as he has significant interest in Samsung Life, which holds a 7.56 per cent stake in the world’s largest consumer electronics company.

Jay-yong is currently the largest shareholder with a 25.1 per cent stake in Everland, while his sisters Boo-jin and Seo-hyun both hold 8.37 per cent. The Samsung chairman holds 3.72 per cent.

KCC, a construction materials company whose owner is related to Hyundai Motor chairman Chung Mong-koo, has been highlighted as one of the main beneficiaries of Everland’s IPO as it is the second-largest shareholder.

Samsung Everland was founded in 1967 by late former chairman Lee Byung-chull as a real estate firm, which later expanded into a wide range of businesses from a theme park and golf resort to construction and food.

It has been streamlining its businesses and management to focus on fashion, resorts and construction, which was seen as a move by the Samsung vice chairman to take over the ownership of Samsung Group.

Samsung Everland sold its building management division to Samsung’s security unit S-1, and Samsung SDS acquired Samsung SNS. Samsung General Chemicals took over Samsung Petrochemical in April.

 

About bambooinnovator
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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