Samsung to merge two major units

[SEOUL] Samsung Group announced on Tuesday the merger of two major affiliates, as the South Korean business giant accelerates restructuring efforts ahead of a generational power transfer within the founding Lee family.

The all stock deal, approved by the boards of both companies would see Samsung's de facto holding company Cheil Industries - which has interests from fashion to theme parks - acquire general trade and construction affiliate Samsung C&T.

The merger, which is expected to be completed by September pending shareholder approval, will see Cheil offer 0.35 new shares for each Samsung C&T share.

The two companies are both listed on the Seoul stock market, with Cheil valued at 22 trillion won (S$2.7 billion) and Samsung C&T 8.6 trillion won as of Tuesday morning.

The combined company - to be called Samsung C&T - will target annual sales of about 60 trillion won in 2020, compared to their combined sales of 34 trillion won in 2014, Samsung said in a statement.

"The two companies expect to create synergy by combining their construction businesses, while Samsung C&T's global network will help develop new opportunities overseas for Cheil's fashion, resort and catering businesses," the statement said.

Tuesday's announcement was the latest in a series of moves apparently aimed at solidifying the Lee family's grip on the sprawling behemoth.

The family-run Samsung Group, currently chaired by Lee Kun Hee, has merged, broken out or newly listed some of its key units in recent years as he prepares to hand over helm to his son, J.Y. Lee.

The Lee family controls the vast Samsung Group via a complex web of cross shareholdings across the group's subsidiaries, including Cheil, where J.Y. Lee has a controlling stake.

Samsung C&T has a four per cent stake in Samsung Electronics - the group's flagship unit which is the world's top maker of smartphones and mobile phones.

The Lee family currently has a less than five per cent stake in Samsung Electronics, a holding that will be boosted by the merger.

"This is a merger of the two most important Samsung units from the perspective of the heir," said Lee Kwang Soo, analyst at Seoul-based Mirae Asset Securities.

AFP