Samsung Electronics says difficult to adopt holding company structure

[SEOUL] Samsung Electronics Co Ltd said on Friday it will be difficult to adopt a holding company structure at this time, giving investors their first insight into how the South Korean tech giant is approaching a potential restructuring.

Investors have long speculated that the global leader in smartphones and memory chips will adopt a holding company structure, as the founding Lee family heirs seek to solidify their control of the flagship unit of Samsung Group.

But chief executive Kwon Oh-Hyun told the annual shareholder meeting in Seoul that this was unlikely at this stage.

"There are negative effects that would arise from transitioning to a holding company so it does not appear it will be easy to do so at present," he said.

The comments sent shares of Samsung C&T Corp, seen as a likely beneficiary if Samsung Electronics adopted a holding structure, down nearly 7 per cent in early trade.

Samsung in November began reviewing whether to adopt a holding company structure following a proposal by US activist hedge fund Elliott Management and pressure from investors to improve its corporate governance.

The firm said at the time of the announcement its review would take at least six months, and until now it has been taciturn about how any restructuring may proceed.

An Elliott spokesman declined to comment.

Investors have long complained that Samsung shares trade at steep discounts to global peers due to what they say is a complex ownership structure, poor corporate governance and inefficient cash management.

The hope is that a major restructuring would address those concerns and boost the company's value.

REUTERS