Samsung C&T, the construction and trading arm of Samsung Group, is set to push for in-house reorganization after its merger with Cheil Industries next week.

The first target for restructuring in the merged entity is believed to be its construction divisions, which are the only overlapping business area of the two Samsung affiliates. Cheil Industries’ business portfolio ranges from fashion to construction to resorts.

Local reports said the reorganization process will begin after the two Samsung units finalize the merger on Sept. 2.

In addition to the overlapping, the falling profits of C&T‘s construction business is another reason for the push for restructuring, sources said. 

Speculation is rising that Samsung C&T may stay away from housing construction domestically due to its low profitability. But observers said it may keep its popular apartment brand Raemian for the time being.

One source said Samsung C&T has decided to wind down its housing business with the exception of profitable reconstruction projects in expensive areas in Gangnam, Seoul.

“Samsung C&T will focus on some symbolic reconstructions in Gangnam and slowly phase out. It’s a troublesome business for them, with lots of civil complaints and low profitability,” the source said.

Some market insiders speculate that Samsung Group heir apparent Lee Jae-yong’s lack of interest in construction and heavy industry business raises the possibility of phasing out the business.

Samsung Electronics vice chairman Lee is eyeing the development of a bio industry as one of the growth engines his conglomerate will push.

Cheil Industries president Yoon Ju-hwa announced last month that the merger will support its construction unit‘s push into building biotechnology plants.

Analysts said the announcement not only signals that Cheil is gaining the upper hand in the merged entity’s construction business by carrying what is expected to be a growth engine, but also that Samsung is gradually shifting its focus onto the biopharmaceutical market.

“When the merger is complete, combining and abolishing some teams is an inevitable process. Judging by Cheil and Samsung C&T’s recent decisions, there is a high chance that the C&T’s construction business is on the top of the list for restructuring,” an official from Samsung C&T was quoted as saying.

The merger between the two affiliates within Samsung Group is also expected to be accompanied by a large-scale reshuffle of executives and unifying in-house organizations, analysts said.

The two Samsung companies voted for the merger in July despite opposition from some shareholders led by U.S. hedge fund Elliott Associates.

By Suk Gee-hyun (monicasuk@heraldcorp.com)