Samsung to unveil group restructuring as investors push for broad change

Samsung Electronics said it will announce ways to improve shareholder returns on Tuesday, as heir apparent Jay Y Lee faces rising pressure from investors for broad change.

South Korea’s most valuable company will hold a conference call at 9:30 am in Seoul to discuss any potential steps, it said in a regulatory filing. Samsung executives and Elliott Management have been talking with investors in the US and Korea to sound out opinions on the activist investor’s proposals to overhaul the Suwon, South Korea-based technology giant, people familiar with the matter said.

Shareholders are voicing dissatisfaction with the status quo after the Note 7 battery crisis that will cost more than $6 billion and at least two raids on its offices as part of a widening political scandal in Korea.

 Elliott, led by billionaire Paul Elliott Singer, has proposed that Samsung Electronics improve its corporate governance by adding three independent board members, list shares on a US exchange, pay shareholders a special dividend of 30 trillion Korean won ($26 billion) and separate into an operating company and a holding company.

Samsung didn’t mention in Monday’s filing whether it’s considering a split or any other steps. The company declined to comment for this story.  The stock rose 1.6 per cent, leaving it up 33 per cent this year. Investors are beginning to express support for Elliott’s ideas not just in private meetings but also in public. “We agree with Elliott’s proposals,” said Daniel O’Keefe, managing director of Artisan Partners and co-founder of the Artisan Global Value Team. 

“We think Samsung in its current structure faces certain existential threats. Its governance, board and management structure is not well suited to the rapidly changing and highly competitive technology industry. Its board of directors has no truly independent members with experience in global operations, technology and capital allocation.”

Samsung completed a share buyback worth 11.3 trillion won earlier this year, and has committed to return 30 per cent to 50 per cent of free cash flow to shareholders for three years starting from 2015. If Samsung Electronics agrees to the split, it would probably give the controlling family more clout over the unit.