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Samsung to unveil
shareholder return plans amid calls to split company
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 [November 28, 2016]
By Se Young Lee
SEOUL
(Reuters) - Samsung Electronics Co Ltd said it will disclose plans to
boost shareholder value on Tuesday - a move that comes amid pressure
from U.S. fund Elliott Management to split the company in two and
provide more in payouts.
The U.S. activist hedge fund, which owns 0.6 percent of Samsung, called
on the South Korean tech giant in October to divide itself into a
holding vehicle for ownership purposes and an operating company, as well
as pay out 30 trillion won ($26 billion) in a special dividend.
The Seoul Economic Daily, citing an unidentified source, reported on
Monday the firm will say it plans to consider a split. Samsung declined
to elaborate further on Monday on its plans, although it said last month
it is considering buying back more shares.
A split in two has long been a subject of market speculation with
analysts noting that such a move could help the Samsung Group founding
family heirs to boost their control of the world's top maker of
smartphones, memory chips and televisions.
"It's difficult to argue with the logic of Elliott’s proposals," said
David Smith, head of corporate governance at Aberdeen Asset Management
Asia. "A simpler structure is certainly preferable, and yes most would
agree they can afford to pay out more.
"What is important is that these changes should benefit all involved,
including family, group, and minority shareholders,” he said.
Samsung is also keen not to alienate investors at a time when it is
reeling from a disastrous withdrawal of the fire-prone Galaxy Note 7
smartphone that the firm projects will cost 6.1 trillion won in profits
over three quarters.
Its offices have also been raided by prosecutors as part of a widening
political scandal involving a confidante of President Park Geun-hye.
Samsung said it will hold a conference call at 9:30 a.m. local time
(0030 GMT) on Tuesday to discuss its plan.
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The logo of Samsung Electronics is seen at its headquarters in
Seoul, South Korea, July 4, 2016. REUTERS/Kim Hong-Ji/File Photo
Other measures proposed by Elliott, which unsuccessfully challenged a
controversial 2015 merger of two Samsung Group affiliates, includes the
return of at least 75 percent of free cash flow to investors and the
appointment of some independent directors.
New shareholder return plans would also follow a tightening of control
by de facto Samsung Group leader Jay Y. Lee, who took over the reins
after his father and Samsung patriarch was incapacitated following a May
2014 heart attack.
Samsung Group has sold non-core assets and pushed through a merger of
two affiliates in 2015 to consolidate stakes in key affiliates under a
company controlled by Jay Y. Lee and his two sisters, as the founding
family moves to secure a stable transfer of control.
Lee also recently became a board member at Samsung Electronics.
"Even if Samsung Electronics does not comment on specifics such as the
timing of a split ... the firm will at least say it will implement
ownership structure changes in a reasonable manner," HI Investment said
in a report on Monday.
($1 = 1,169.1800 won)
(Reporting by Se Young Lee; Additional reporting by Anshuman Daga;
Editing by Stephen Coates and Edwina Gibbs)
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