Samsung Electronics rejects calls for holding company structure, for now

Fri Mar 24, 2017 4:25pm EDT
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By Se Young Lee

SEOUL (Reuters) - Samsung Electronics Co Ltd (005930.KS: Quote) on Friday said it will not adopt a holding company structure for now, rejecting demands from U.S. activist hedge fund Elliott Management and putting off a long-anticipated restructuring.

Investors had expected the global leader in smartphones and memory chips to adopt a holding company structure, as the founding Lee family tries to solidify its control of the Samsung Group [SAGR.UL] flagship.

But Chief Executive Kwon Oh-hyun told the annual shareholder meeting this was unlikely at present, deflating some investors' hopes that an ongoing review of the company's organization will lead to Samsung setting up a holding company.

"Samsung had been saying the review would proceed without issues, so the market had accepted that, but now they are saying the transition will be difficult," said CJ Heo, a fund manager at Alpha Asset Management.

"This will hurt investor sentiment for a while.”

The South Korean tech giant used the general meeting to give investors a sense of how it is approaching the mooted restructuring, which has been thrown into doubt by a political scandal that has embroiled Samsung Group leader Jay Y. Lee.

"There are negative effects that would arise from transitioning to a holding company so it does not appear it will be easy to do so at present," Kwon said, without elaborating what those negatives were.

The company is continuing its review and will report the results to shareholders when it is completed, he said.   Continued...

Kwon Oh-Hyun, co-chief executive officer of Samsung Electronics Co., speaks during the company's annual general meeting at the Seocho office building in Seoul, South Korea, on Friday, March 24, 2017. REUTERS/SeongJoon Cho/Pool