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 Cheil Industries Inc, with interests from construction to fashion,
is offering new stock priced at about 8.9 trillion won ($8.11
billion) to buy building firm Samsung C&T Corp. After recent market
jitters on Samsung's overhaul, shares in both rose nearly 15 percent
- taking Samsung C&T's value beyond the offer price to about 10
trillion won.
The move combines what analysts consider two key companies in the
sprawling family-controlled conglomerate. It would also cement the
position of heir-apparent and Samsung Electronics vice chairman Jay
Y. Lee, likely to remain top shareholder of the merged entity, as
Samsung prepares for the eventual transfer of control from ailing
patriarch Lee Kun-hee to his children.
Samsung C&T's 4.06 percent stake in Samsung Electronics, worth
nearly $8 billion at current market prices, makes it the
third-largest investor in the tech giant after South Korea's
National Pension Service and Samsung Life Insurance.
"There will be a solidification of the ownership structure with Jay
Y. clearly being the largest shareholder," a person familiar with
Samsung strategy told Reuters. The person said that the merger is
consistent with changes over the past 12 months as Samsung seeks to
a smooth transfer of control from the senior Lee, hospitalized since
a heart attack last year.
The latest move still needs to be approved by shareholders and isn't
likely to be the last in the group's revamp, which has not been
without hitches. In November, Samsung Heavy Industries scrapped a
$2.5 billion takeover of Samsung Engineering due to shareholder
opposition.
Under the agreed deal, Cheil is offering 0.35 new Cheil shares,
issued at a fixed price, for each Samsung C&T share in a deal that
values the target at 8.9 trillion won. The combined entity, to
retain the name Samsung C&T, will also become the biggest
shareholder of Samsung's biopharmaceutical business, putting under
Jay Y. Lee's control what has been flagged as a prospective new
growth driver for the group.
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Amid Tuesday's share price surge, some in Seoul said shareholder
approval isn't a foregone conclusion.
"Some shareholders that believe that Samsung C&T prices are
undervalued...could oppose the deal," said Baek Kwang-jae, a
construction analyst at Kyobo Securities. "However, if the share
prices continue to rise sharply, shareholders may agree on the
merger."
If the deal, due to close by September, goes through, other issues
Samsung still has to resolve include inheritance tax if Lee Kun-hee
multi-billion dollar stakes in Samsung Electronics - 3.38 percent -
or Samsung Life Insurance - 20.76 percent - are passed on to his
heirs.
($1 = 1,098.0000 won)
(Additional reporting by Sohee Kim and Hyunjoo Jin; Editing by
Richard Pullin, Ryan Woo and Kenneth Maxwell)
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