Samsung Group files IPOs as company restructures

The moves may help heir apparent Lee Jae Yong retain control of crown jewel Samsung Electronics Co after his 72-year-old father Lee Kun Hee was hospitalised following a heart attack

Samsung Group filed to raise as much as 2.68 trillion won ($2.5 billion) in separate initial public offerings as the Lee family restructures ownership of South Korea's largest conglomerate.

Cheil Industries Inc., the de facto holding company, filed for a 1.52 trillion won IPO, the company said on Friday. Samsung SDS Co, a provider of technology services, priced shares for its 1.16 trillion won offer at the top of the marketed range.

Samsung Group is revamping an empire spanning smartphones and televisions to insurance and construction. The moves may help heir apparent Lee Jae Yong retain control of crown jewel Samsung Electronics Co after his 72-year-old father Lee Kun Hee was hospitalised following a heart attack.

"The IPOs will help Samsung's third generation, including Lee Jae Yong," said Heo Pil Seok, chief executive officer at Midas International Asset Management Ltd, which oversees $10 billion, including Samsung Electronics shares. "The listings of Cheil and SDS is a signal that there will be a change in the group's structure." Political pressure is mounting on Samsung to unwind a web of cross-shareholdings that allows the Lee family to maintain control of about 70 companies with less than a 2 per cent total stake.

President Park Geun Hye's government has banned the creation of new cross-shareholdings and offered tax breaks for restructuring as part of measures to improve corporate governance and make the family-run chaebol business groups more transparent.

Inheritance taxes
In order to take control of Samsung Group, Lee's three heirs face inheritance taxes that could exceed $5 billion for their father's $12.2 billion fortune.

Lee Jae Yong owns more than 11 per cent of Samsung SDS and is the largest shareholder of Cheil with a 25 per cent stake.

Cheil, formerly known as Samsung Everland Inc, said in June it was seeking to go public to help overseas expansion and improve management transparency. The company sits atop the group via direct and indirect stakes in affiliates including Samsung Electronics and Samsung Life Insurance Co.

The theme park operator will sell shares in the range of 45,000 won to 53,000 won, according to a prospectus filed with South Korean regulators. SDS stock will be sold at 190,000 won apiece after being marketed in a range of 150,000 won to 190,000 won.

Stalling smartphones
Samsung Electronics may accelerate a push into wearable devices and home appliances that communicate wirelessly after its third-quarter operating profit plunged 60 per cent because of stagnating smartphone sales. Samsung will spend 15.6 trillion won building a semiconductor plant in South Korea to meet demand for the brains that run smartwatches, fitness monitors, automobiles and refrigerators.

Kiwoom Securities Co. estimated Cheil's value at 8.26 trillion won in a research report in June.

Cheil's listing is probably aimed at increasing its value to make it easier to merge other key affiliates, according to Park Ju Gun, president of corporate watchdog CEOSCORE. The listing of the strategically less important SDS may be used by the younger Lees to fund their inheritance tax, he said.

Samsung Heavy Industries Co, the world's third-largest maker of ships, and Samsung Engineering Co said September 1 they will merge before the end of the year in a deal valued at about 2.5 trillion won.