Finance Article
Corporate Restructuring at Samsung Group
Samsung Heavy Industries Co. 010140.SE +0.37%, the world's second-largest shipbuilder by revenue, will absorb Samsung Engineering Co. by issuing 2.36 new shares for every Samsung Engineering share. The deal is valued at 2.5 trillion won ($2.5 billion), the companies said in a regulatory filing.
The companies added that the merger is aimed at boosting Samsung Heavy's expertise in offshore plant construction and raising operational efficiency. The two companies will have combined annual revenue of about 25 trillion won, based on figures for 2013.
The long and short of the merger
Since Lee Kun-hee, the chairman of the Samsung conglomerate's core business unit, Samsung Electronics Co. 005930.SE +1.77% , suffered a heart attack in May, the group has announced a string of financial deals intended to realign various business units. Mr. Lee remains hospitalized but is stable, according to Samsung officials.
Analysts view the realignment deals as part of the preparations for a power transfer at the conglomerate to Mr. Lee's son, Jay Y. Lee. A spokesman for Samsung Heavy said the Samsung Engineering merger isn't relevant to any succession plans.
Samsung has announced plans for two large initial public offerings of stock this year, one for its information-technology unit, Samsung SDS Co., and another for the group's de facto holding company, known as Samsung Everland Inc. The proceeds from these IPOs could be used to secure funds needed by the younger Mr. Lee to strengthen his hold over some important affiliates, analysts say.
Jay Y. Lee, the only son and the eldest among Lee Kun-hee's children, was promoted to vice chairman of Samsung Electronics in December 2012, but doesn't hold any operational title within the company.
The likely post scenario merger and investor confidence
Samsung Electronics, which is currently the largest shareholder of Samsung Heavy, will retain its No. 1 position after the merger.
Investors are closely watching how control of Samsung Group will transfer to heir apparent Jay Y. Lee and his two sisters. The planned
initial public offerings of Cheil Industries Inc - formerly called Samsung Everland - and Samsung SDS are seen as key elements in the succession process.
Samsung Heavy will issue around 94 million new shares to Samsung Engineering shareholders at 26,972 won per share, valuing the deal at around 2.5 trillion won. Samsung Heavy shares closed at 27,250 won per share on Friday.
Shares in Samsung Heavy and Samsung Engineering had climbed more than 5.5 percent by 0056 GMT after the announcement.
"Samsung Group has recently completed a series of mergers between sister companies that have related businesses, and this merger is likely a continuation of such trend," Kiwoom Securities analyst Park Joong-sun said.
"This deal probably doesn't have much to do with the succession process because the third-generation of the Lee family do not personally own shares in either of the companies."
Samsung Group had already split off its fashion-and-electronics materials unit Cheil Industries Inc earlier this year, merging the materials business with Samsung SDI Co Ltd and the fashion business with Samsung Everland. Samsung Everland later changed its name to Cheil Industries.
The group also had unlisted unit Samsung General Chemicals Co Ltd acquire Samsung Petrochemical Co Ltd in the first half of this year.
