Corporate maneuver at Samsung strengthens heir's influence

May 26, 2015 byYoukyung Lee
In this July 13, 2012 file photo, Samsung Electronics Co. Chief Operating Officer Lee Jae-yong arrives at the Allen and Company Sun Valley Conference in Sun Valley, Idaho. Two key Samsung companies are merging in a step toward ensuring the son of the group's ailing chairman inherits control of the theme parks to smartphones conglomerate. Samsung said Tuesday, May 26, 2015, that its defacto holding company Cheil Industries Inc. will acquire Samsung C&T Corp. by offering 0.35 new Cheil shares for every Samsung C&T share. Analysts say the transaction will give Samsung heir Lee Jae-yong a big say in the conglomerate including its crown jewel Samsung Electronics Co. (AP Photo/Paul Sakuma, File)

Two key Samsung companies are merging in a step toward ensuring the son of the group's ailing chairman inherits control of the theme parks to smartphones conglomerate.

Samsung said Tuesday that its defacto holding company Cheil Industries Inc. will acquire Samsung C&T Corp. by offering 0.35 new Cheil shares for every Samsung C&T share.

The move, to be completed by Sept. 1, requires shareholder approval, which is expected. The combined entity will be named Samsung C&T.

Analysts say the transaction will give Samsung heir Lee Jae-yong a big say in the conglomerate including its crown jewel Samsung Electronics Co.

"Samsung Electronics is at the core of this event," said Park Ju-gun, president at CEOScore, a private corporate watchdog. "If Lee Jae-yong controls C&T, he can secure control over Samsung Electronics."

The corporate maneuvering reflects that the Lee family's influence over Samsung Electronics through a life insurance company was at risk as the South Korean parliament is set to pass a law that restricts finance companies from controlling non-finance companies.

Lee, his father Lee Kun-hee and other family members have a small direct stake in Samsung Electronics but have been able to exert influence through cross shareholdings in affiliated companies, the most significant of which was Samsung Life Insurance. Altogether, they control about 29 percent of Samsung Electronics shares, which is the largest voting bloc.

Corporate maneuver at Samsung strengthens heir's influence
Office workers walk by a logo of Samsung C&T Corp. at its head office in Seoul, South Korea, Tuesday, May 26, 2015. Two key Samsung companies are merging in a step toward giving the son of the group's ailing chairman control of the theme parks to smartphones conglomerate. Samsung says its defacto holding company Cheil Industries Inc. will acquire Samsung C&T Corp. by offering 0.35 new Cheil shares for every Samsung C&T share. (AP Photo/Lee Jin-man)

Lee Kun-hee, 73, who remains chairman at Samsung Electronics, has been hospitalized for more than a year after suffering a heart attack in May, 2014. Lee Jae-yong earlier this month took over his father's roles in two Samsung charitable foundations.

The Lee family will likely take additional steps to enlarge C&T's stake Samsung Electronics as a lynchpin of the cross shareholdings, said Park. It currently owns 4.1 percent of the electronics giant.

Lee, who is vice chairman at Samsung Electronics, will own 16.5 percent of the new C&T and be its largest shareholder. The Lee family's direct stake in the combined entity, including that of Lee's father and his sisters, will become 30.4 percent. Samsung's affiliated companies will own another 8.8 percent, giving the family nearly a 40 percent stake overall in C&T.

Corporate maneuver at Samsung strengthens heir's influence
Office workers walk by a logo of Samsung C&T Corp. at its head office in Seoul, South Korea, Tuesday, May 26, 2015. Two key Samsung companies are merging in a step toward giving the son of the group's ailing chairman control of the theme parks to smartphones conglomerate. Samsung says its defacto holding company Cheil Industries Inc. will acquire Samsung C&T Corp. by offering 0.35 new Cheil shares for every Samsung C&T share. (AP Photo/Lee Jin-man)

Samsung said the merger of Cheil, which is Samsung's fashion business and theme park operator, with the C&T construction and trading firm, will create a global lifestyle and biotechnology company.

Shares of Cheil and C&T jumped by the daily limit of 15 percent after the announcement.

Corporate maneuver at Samsung strengthens heir's influence
Office workers walk by a logo of Samsung C&T Corp. at its head office in Seoul, South Korea, Tuesday, May 26, 2015. Two key Samsung companies are merging in a step toward giving the son of the group's ailing chairman control of the theme parks to smartphones conglomerate. Samsung says its defacto holding company Cheil Industries Inc. will acquire Samsung C&T Corp. by offering 0.35 new Cheil shares for every Samsung C&T share. (AP Photo/Lee Jin-man)
Corporate maneuver at Samsung strengthens heir's influence
The sign of Cheil Industries Inc., right, is seen on the top of the building in Seoul, South Korea, Tuesday, May 26, 2015. Two key Samsung companies are merging in a step toward giving the son of the group's ailing chairman control of the theme parks to smartphones conglomerate. Samsung says its defacto holding company Cheil Industries Inc. will acquire Samsung C&T Corp. by offering 0.35 new Cheil shares for every Samsung C&T share. (AP Photo/Lee Jin-man)

Explore further: Samsung chairman keeps fortune in inheritance case

Related Stories

Samsung chairman keeps fortune in inheritance case

February 1, 2013

The chairman of Samsung Electronics has kept his fortune and control of the Samsung conglomerate after a South Korean court Friday ruled against his older brother in an inheritance battle.

Samsung promotes chairman's son to vice chairman

December 5, 2012

Samsung Electronics Co. promoted its chairman's only son to vice chairman, putting the 44-year-old closer to the top leadership position at the world's largest maker of memory chips, mobile phones and TVs.

Brother of Samsung chief loses inheritance appeal

February 6, 2014

The elder brother of South Korea's richest man, Samsung Electronics chairman Lee Kun-Hee, lost his court appeal Thursday for an $850 million share of his sibling's inherited wealth.

As Samsung falters, mysterious scion in the wings

November 5, 2014

As Samsung's smartphone business suffers a dizzying decline, another issue is vexing investors. Command of one of the world's most valuable consumer brands will eventually pass to the son of its ailing patriarch whose business ...

Samsung promotes chairman's son to president

December 3, 2010

(AP) -- A scion of the family that founded the sprawling Samsung conglomerate has been promoted to president at the flagship electronics business, sending its shares to a record high.

Recommended for you

NASA's Mars 2020 rover is put to the test

March 20, 2019

In a little more than seven minutes in the early afternoon of Feb. 18, 2021, NASA's Mars 2020 rover will execute about 27,000 actions and calculations as it speeds through the hazardous transition from the edge of space to ...

0 comments

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.