Samsung SDS’ IPO seen to aid Lee’s inheritance

By Park Hyung-ki
  • Published : May 9, 2014 - 21:31
  • Updated : May 12, 2014 - 08:20
Samsung SDS’ announcement to launch an initial public offering this year has not only put Samsung family owners and the company’s affiliates, including Samsung C&T and Samsung Everland, under the spotlight, but also a non-Samsung company KCC.

The company’s IPO, in what seemed like a move aligned with Samsung chairman Lee Kun-hee’s inheritance plan for his three children, has further boosted the value of Samsung C&T, the group’s construction and trading arm that is the second biggest shareholder of SDS after Samsung Electronics.

Samsung C&T was previously highlighted as the beneficiary of a merger between Samsung’s two key chemicals units ― Samsung General Chemicals and Samsung Petrochemical ― as it is the biggest shareholder of the two.

“Samsung SDS’ IPO could be seen as the preparation for the group’s future restructuring,” said Kim Dong-yang, an analyst at Woori Investment & Securities.

With Samsung Group’s restructuring in full gear, the market is expecting Samsung Everland, the de facto holding company, to be the next that could face an equity reorganization to let chairman Lee hand over his electronics and financial units to his son Jay-yong.

His first daughter Boo-jin is expected to take over Samsung’s hotel and infrastructure business, while his other daughter Seo-hyun will take over fashion, entertainment and content.

As the attention shifted to Everland, Samsung’s amusement park company, following Samsung SDS’ public offering plan, its main shareholder KCC, a construction materials maker, has also been branded one of the beneficiaries alongside the Lee family and Samsung C&T.

KCC has a 17 percent stake in Everland, the second biggest shareholder after Jay-yong. Samsung C&T also owns a 1.48 percent share in the amusement park operator, according to an audit filing.

KCC shares rose 4.39 percent to 523,000 won, while Samsung C&T rose 0.91 percent to 66,500 won on Friday.

KCC purchased its Everland share from Samsung Card three years ago, which came as a surprise as most market observers expected the card unit to offload the stake to one of its manufacturing affiliates. KCC is owned by chairman Chung Mong-jin, a cousin of Hyundai Motor chairman Chung Mong-koo.

Samsung’s equity retooling is forecast to continue at its financial units as they would have to abide by pending financial laws forbidding financial companies from owning shares in non-financial affiliates.

Manufacturing conglomerates can keep their financial units as long as they realign the business under the so-called intermediate financial holding company without any cross-shareholdings between financial and non-financial businesses.

And the task for Samsung remains over handing the critical Samsung Life Insurance’s 20.76 percent stake owned by chairman Lee over to his son. It is the share, as analysts said, that would help Jay-yong maintain control over the group of electronics and financial companies in the future.

This is where Samsung SDS’ IPO comes in as it would not only provide a possible exit for Lee’s daughters and non-electronics units such as Samsung C&T, but provide some key capital for Lee’s son to buy his father’s shares and pay for capital gains and inheritance taxes.

By Park Hyong-ki (