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Samsung Electronics faces investor pressure, considers structural split

South Korea's Samsung Electronics Co Ltd said it will increase dividends and consider splitting itself

Reuters  |  Seoul 

Samsung Electronics considers structural split as investor pressure builds
Samsung Electronics considers structural split as investor pressure builds

South Korea's Co Ltd said on Tuesday it will increase dividends and consider splitting itself, as the tech giant faces possibly the biggest in its 47-year history.

The world's top maker of smartphones, memory chips and televisions, however, said it was "absolutely neutral" about whether to proceed, and provided little detail on the potential restructuring, underwhelming and keeping shares flat.

"The review does not indicate the management or the board's intention one way or another," the company said in a statement, adding it hired external advisers for a review that is expected to take at least six months.

The move comes after U.S. activist hedge fund Elliott Management in October called for the firm to split itself into a holding vehicle for ownership purposes and an operating company, and boost shareholder returns.

Shares in Samsung, worth $224 billion, traded largely flat, rising 0.06 percent by 0519 GMT. A boost in 2016 payouts fell short of some investors' expectations while uncertainty over the restructuring kept at bay, analysts said.

"There is some disappointment that the dividend wasn't even higher or possibly a special dividend and this is the reason for a flat share price today," said Sat Duhra, asset manager at Henderson Global Investors.

did not directly address Elliott's proposals on Tuesday, but the firm promised to respond by the end of November.

The company pledged to return 50 percent of free cash flow for 2016 and 2017, versus Elliott's call for up to 75 percent to be returned on top of a $26 billion special dividend.

also said it was not considering merging its owner vehicle with C&T Corp, Group's de facto holding company, even if it were to move to a holding company structure, rejecting another Elliott proposal.

"I don't think said much that was surprising or beyond what had already had in mind," said HDC Asset Management fund manager Park Jung-hoon.

Succession

and analysts have long viewed a split for as a way for Lee family scion Jay Y. Lee and his two sisters to boost their control of South Korea's top conglomerate, the Group.

While executives did not comment on potential deal structures, believe the Lees and Group affiliates will exchange their operating company shares for stock in the holding firm, strengthening their grip.

would then return more capital to shareholders, say. Such a move would boost earnings for Group firms and the Lee heirs, who face a multi-billion dollar inheritance tax in the event that 74-year-old Group patriarch Lee Kun-hee passes away. The senior Lee has been in hospital since May
2014 after suffering a heart attack.

have said that shares trade at steep discounts to global peers due to its 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.

"We would be satisfied that the company, as with many other Korean corporates, is moving in the right direction in addressing decades of inefficient structures, poor governance and weak corporate behaviour towards minority shareholders," said Duhra at Henderson.

In another nod to investors, said it would increase dividends for 2016 by 36 percent to 28,500 won ($24.36) per share, and buy back and cancel additional shares in January 2017 with whatever excess free cash remains from 2016.

The firm also said it needed to maintain a net cash position of between 65 trillion won and 70 trillion won, suggesting it is not likely to pay the 30 trillion won special dividend sought by Elliott.

Elliott says has the highest net cash position and lowest dividend payout ratio compared with its global peers of Qualcomm, Apple and TSMC due to its conservative cash management.

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Samsung Electronics faces investor pressure, considers structural split

South Korea's Samsung Electronics Co Ltd said it will increase dividends and consider splitting itself

South Korea's Samsung Electronics Co Ltd said it will increase dividends and consider splitting itself
South Korea's Co Ltd said on Tuesday it will increase dividends and consider splitting itself, as the tech giant faces possibly the biggest in its 47-year history.

The world's top maker of smartphones, memory chips and televisions, however, said it was "absolutely neutral" about whether to proceed, and provided little detail on the potential restructuring, underwhelming and keeping shares flat.

"The review does not indicate the management or the board's intention one way or another," the company said in a statement, adding it hired external advisers for a review that is expected to take at least six months.

The move comes after U.S. activist hedge fund Elliott Management in October called for the firm to split itself into a holding vehicle for ownership purposes and an operating company, and boost shareholder returns.

Shares in Samsung, worth $224 billion, traded largely flat, rising 0.06 percent by 0519 GMT. A boost in 2016 payouts fell short of some investors' expectations while uncertainty over the restructuring kept at bay, analysts said.

"There is some disappointment that the dividend wasn't even higher or possibly a special dividend and this is the reason for a flat share price today," said Sat Duhra, asset manager at Henderson Global Investors.

did not directly address Elliott's proposals on Tuesday, but the firm promised to respond by the end of November.

The company pledged to return 50 percent of free cash flow for 2016 and 2017, versus Elliott's call for up to 75 percent to be returned on top of a $26 billion special dividend.

also said it was not considering merging its owner vehicle with C&T Corp, Group's de facto holding company, even if it were to move to a holding company structure, rejecting another Elliott proposal.

"I don't think said much that was surprising or beyond what had already had in mind," said HDC Asset Management fund manager Park Jung-hoon.

Succession

and analysts have long viewed a split for as a way for Lee family scion Jay Y. Lee and his two sisters to boost their control of South Korea's top conglomerate, the Group.

While executives did not comment on potential deal structures, believe the Lees and Group affiliates will exchange their operating company shares for stock in the holding firm, strengthening their grip.

would then return more capital to shareholders, say. Such a move would boost earnings for Group firms and the Lee heirs, who face a multi-billion dollar inheritance tax in the event that 74-year-old Group patriarch Lee Kun-hee passes away. The senior Lee has been in hospital since May
2014 after suffering a heart attack.

have said that shares trade at steep discounts to global peers due to its 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.

"We would be satisfied that the company, as with many other Korean corporates, is moving in the right direction in addressing decades of inefficient structures, poor governance and weak corporate behaviour towards minority shareholders," said Duhra at Henderson.

In another nod to investors, said it would increase dividends for 2016 by 36 percent to 28,500 won ($24.36) per share, and buy back and cancel additional shares in January 2017 with whatever excess free cash remains from 2016.

The firm also said it needed to maintain a net cash position of between 65 trillion won and 70 trillion won, suggesting it is not likely to pay the 30 trillion won special dividend sought by Elliott.

Elliott says has the highest net cash position and lowest dividend payout ratio compared with its global peers of Qualcomm, Apple and TSMC due to its conservative cash management.
image
Business Standard
177 22

Samsung Electronics faces investor pressure, considers structural split

South Korea's Samsung Electronics Co Ltd said it will increase dividends and consider splitting itself

South Korea's Co Ltd said on Tuesday it will increase dividends and consider splitting itself, as the tech giant faces possibly the biggest in its 47-year history.

The world's top maker of smartphones, memory chips and televisions, however, said it was "absolutely neutral" about whether to proceed, and provided little detail on the potential restructuring, underwhelming and keeping shares flat.

"The review does not indicate the management or the board's intention one way or another," the company said in a statement, adding it hired external advisers for a review that is expected to take at least six months.

The move comes after U.S. activist hedge fund Elliott Management in October called for the firm to split itself into a holding vehicle for ownership purposes and an operating company, and boost shareholder returns.

Shares in Samsung, worth $224 billion, traded largely flat, rising 0.06 percent by 0519 GMT. A boost in 2016 payouts fell short of some investors' expectations while uncertainty over the restructuring kept at bay, analysts said.

"There is some disappointment that the dividend wasn't even higher or possibly a special dividend and this is the reason for a flat share price today," said Sat Duhra, asset manager at Henderson Global Investors.

did not directly address Elliott's proposals on Tuesday, but the firm promised to respond by the end of November.

The company pledged to return 50 percent of free cash flow for 2016 and 2017, versus Elliott's call for up to 75 percent to be returned on top of a $26 billion special dividend.

also said it was not considering merging its owner vehicle with C&T Corp, Group's de facto holding company, even if it were to move to a holding company structure, rejecting another Elliott proposal.

"I don't think said much that was surprising or beyond what had already had in mind," said HDC Asset Management fund manager Park Jung-hoon.

Succession

and analysts have long viewed a split for as a way for Lee family scion Jay Y. Lee and his two sisters to boost their control of South Korea's top conglomerate, the Group.

While executives did not comment on potential deal structures, believe the Lees and Group affiliates will exchange their operating company shares for stock in the holding firm, strengthening their grip.

would then return more capital to shareholders, say. Such a move would boost earnings for Group firms and the Lee heirs, who face a multi-billion dollar inheritance tax in the event that 74-year-old Group patriarch Lee Kun-hee passes away. The senior Lee has been in hospital since May
2014 after suffering a heart attack.

have said that shares trade at steep discounts to global peers due to its 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.

"We would be satisfied that the company, as with many other Korean corporates, is moving in the right direction in addressing decades of inefficient structures, poor governance and weak corporate behaviour towards minority shareholders," said Duhra at Henderson.

In another nod to investors, said it would increase dividends for 2016 by 36 percent to 28,500 won ($24.36) per share, and buy back and cancel additional shares in January 2017 with whatever excess free cash remains from 2016.

The firm also said it needed to maintain a net cash position of between 65 trillion won and 70 trillion won, suggesting it is not likely to pay the 30 trillion won special dividend sought by Elliott.

Elliott says has the highest net cash position and lowest dividend payout ratio compared with its global peers of Qualcomm, Apple and TSMC due to its conservative cash management.

image
Business Standard
177 22

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