As the fallout of the company’s Note7 issues begins to subside, Samsung Group is facing the prospect of a major split into two separate entities and undertaking new public offerings after agitation by activist hedge fund, Elliot Management.
“Samsung Electronics has taken steps to simplify its business to concentrate on core capabilities in the past several years and the company continues to review opportunities to optimise long-term value,” Samsung said in a statement late last year.
“This includes the possibility of creating a holding company structure and the potential benefits and feasibility of listing the company’s shares on additional international exchanges,” it said.
The move came after the publication of an open letter to Samsung’s board of directors by Blake Capital LLC and Potter Capital – both of which are affiliates of activist hedge fund, Elliot Management – that calls on the company to restructure in a bid to unlock investor value.
While a potential split is on the table, the company is yet to make any firm decisions on how it should restructure to “unlock investor value”, as it continues to undertake a review into its options while retaining control of the group amid shareholder disquiet.
“The review does not indicate the management or the board’s intention one way or another. The process is expected to require at least six months and Samsung Electronics will make a decision only after the review is complete,” it said in November last year.
Meanwhile, Samsung Electronic’s vice-chairman and de facto head, Lee Jay-yong – known as Jay Y. Lee – is facing allegations of bribery and embezzlement, with South Korean prosecutors reportedly seeking a warrant for his arrest.
Samsung denies the allegations.
Lee, the eldest child of Samsung chairman, Lee Kun-hee, is alleged to have participated in payments that Samsung made to a friend of South Korea’s president, Park Geun-hye, to help garner government support in the company’s succession planning, according to Bloomberg.
Despite Samsung's unwieldy size, the company has until now remained tightly-controlled by its septuagenarian chairman, Lee Kun-hee, and his family, which hold sway over the group’s 74 companies through various holdings.
Samsung's vice-chairman has been seen as the company's de facto leader since his father was hospitalised in 2014 after suffering a severe heart attack.
Now, however, if the country's prosecutors get their way and Lee Jay-yong does find himself embroiled in a legal battle with the government, the company could end up facing a leadership vacuum that may give investors even greater cause for concern.
At the time of writing, a court was yet to decide whether to grant a warrant to South Korean prosecutors for the arrest of Lee. The hearing is reportedly scheduled for 18 January.
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