Samsung, as you know, is not just a smartphone company. It may be the largest smartphone manufacturer but it is still so much more. A conglomerate, of which Samsung Electronics is the brightest spot.
Two months ago a big US hedge fund called Elliott Associates proposed that Samsung Electronics – the crown jewel of the Samsung Group – should be split into two as in its current form, the company is undervalued by as much as 70 percent due to the company’s “unnecessarily complex” corporate structure.
The split would allow heirs of the founding Lee family to strengthen their grip on Samsung and thus analysts are of the view that this is something that the heir apparent Jay Y. Lee is interested in as well.
Elliott proposed a split in October to boost shareholder value. Elliott wants Samsung to have a holding company for ownership purposes and another that would focus on operations, and pay a $26bn special dividend and assure to return at least 75% of free cash flow to investors. Along with these, it should agree to appoint some independent directors. Samsung did not really take a stance on the hedge fund’s proposal then, it only said that it will “carefully consider” the proposal.
However, a new report was published in Korea by Seoul Economic Daily earlier today, and according to it, Samsung is actually considering splitting itself into two, which is interesting. Now, this would highly change things over at Samsung, and would require some serious planning on their part, but it could benefit them in the long run.
The company’s board of directors are expected to decide on Elliott’s proposals on Tuesday (29 November). The Korean Exchange has asked Samsung to clarify whether it is planning a split or not by 6pm GMT, reports Reuters.
Samsung obviously won’t do everything that the hedge fund is proposing and it’s also going to engage with it on its own terms. Under Lee’s leadership Samsung’s re-organisational efforts have intensified and the company has been spending aggressively where it sees future growth while selling off lost causes. Samsung sold its non-core assets in 2015 to consolidate stakes in key affiliates.
Via : Business Insider