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Samsung heir apparent moves to tighten grip on group firms

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[October 28, 2014]  By Se Young Lee

SEOUL (Reuters) - Samsung Group heir apparent Jay Y. Lee is moving to acquire small stakes in two of the group's financial firms, which analysts say will help the scion solidify control of South Korea's largest conglomerate as a succession looms.

Lee is seeking regulatory approval to purchase 0.1 percent each of Samsung Life Insurance Co Ltd <032830.KS> and Samsung Fire & Marine Insurance Co Ltd <000810.KS>, Samsung Group said in a statement. He is reinvesting after-tax proceeds of 25.2 billion won ($23.97 million) from selling Samsung Asset Management Co Ltd shares to Samsung Life earlier this year.

Although the companies are already firmly in Samsung Group's grasp, analysts said direct ownership would allow Lee to formally influence how they are managed. Samsung Life is also at the heart of Samsung's complicated shareholding structure and will play an important role in any succession planning.

Samsung declined to comment on why Jay Y. Lee was buying the shares.

Samsung patriarch Lee Kun-hee has been hospitalized since May following a heart attack, putting impetus on his children to ensure a stable transfer of control. Jay Y. Lee, who is the only son, is widely expected to take over crown jewel Samsung Electronics Co Ltd,  as well as the financial firms.

"I think we're now seeing efforts to establish a Jay Y. Lee regime in earnest," said Chung Sun-sup, CEO of research firm Chaebul.com.


Korea Investment Trust Management fund manager Baik Jae-yer said going through the regulatory approval process for Samsung Life now could also serve as a test run ahead of an eventual inheritance of his father's shares in the insurer. The elder Lee is Samsung Life's biggest single stakeholder at 20.8 percent.

"I think this process helps him identify any potential legal hurdles when he looks to inherit those shares," Baik said. The Financial Services Commision will likely decide whether to approve the purchases on Wednesday, said an official at the financial regulator who declined to be named.

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Samsung Group said the younger Lee had no plans to buy more shares in Samsung Life or Samsung Fire & Marine at present. Analysts saw no need for additional purchases to bolster his influence and believed he was more likely to prepare for the inheritance of his father's Samsung Life stake.

The conglomerate has pushed through major initiatives to streamline its structure, including a merger of Samsung Heavy Industries Co Ltd  and Samsung Engineering Co Ltd approved by shareholders on Monday.

Chaebul.com's Chung said Jay Y. Lee could buy shares in other key group companies such as Samsung C&T Corp and Samsung Heavy Industries to further tighten his grip, in line with the strategy pursued by his father.

"Though they may not be big, Lee Kun-hee owns shares in the key affiliates to ensure that he can exert direct control," Chung said.

"Eventually, the shareholding structure will need to become more streamlined but that will take a lot of time and resources, so such stake purchases by Jay Y. Lee will help to maintain control in the meantime."

(Reporting by Se Young Lee and Lee Changho; Editing by Ryan Woo and Edmund Klamann)

[ 2014 Thomson Reuters. All rights reserved.]

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