November 26, 2014 / 1:33 AM / in 3 years

Samsung Group sells shares in chemical, defense arms for $1.7 billion

SEOUL (Reuters) - South Korea’s Samsung Group said on Wednesday it is selling stakes in four chemical and defense firms for 1.9 trillion won ($1.72 billion) to Hanwha Group, the latest move in the massive task of restructuring the country’s largest conglomerate.

People are silhouetted as they pose with mobile devices in front of a screen projected with a Samsung logo, in this picture illustration taken in Zenica October 29, 2014. REUTERS/Dado Ruvic

Samsung Group is reorganizing its business empire to make it easier for the children of Samsung Electronics Co Ltd (005930.KS) chairman Lee Kun-hee, 72, who has been hospitalized since a May heart attack, to divvy up the conglomerate. This has included stake transfers between Samsung units intended to narrow the sprawling group’s focus.

The heirs are also trying to find ways to pay an estimated 6 trillion won inheritance tax bill. The listing of Samsung SDS Co (018260.KS) and the upcoming initial public offering of Cheil Industries Inc would provide greater financial flexibility to manage that process.

“Samsung under Chairman Lee Kun-hee’s leadership expanded into a wide range of businesses, but it looks like (heir apparent) Jay Y. Lee is now looking to move in the other direction and make the group more compact,” said Chung Sun-sup, CEO of research firm Chaebul.com.

In the latest shakeout, affiliates including Samsung Electronics will sell a 32.4 percent stake in defense firm Samsung Techwin Co Ltd (012450.KS) to Hanwha Corp (000880.KS) for 840 billion won, the group said in a statement.

They will also sell a 57.6 percent stake in Samsung General Chemicals Co Ltd to Hanwha Chemical Corp 009830.KS and Hanwha Energy Corp [YCOGN.UL] for 1.06 trillion won, it added.

Samsung’s portion of Samsung Thales Co Ltd, a joint venture with Thales (TCFP.PA), and Samsung Total Petrochemicals Co Ltd, a joint venture with Total SA (TOTF.PA), also would be transferred to Hanwha firms.

While the group did not elaborate on the reason for the sales, Samsung Electronics said in separate regulatory filings that it would use the 761 billion won it raised from the deals to invest in new businesses.

Some analysts say the elder Lee’s illness may have accelerated preparations by his son and his two daughters to ensure a smooth transfer of control to the next generation. The children have not explained how they intend to pay the inheritance tax.

The four companies being sold down in the latest moves are not seen as central to the succession process, and the younger Lees will see little direct financial benefit, analysts said.

Instead, the chemical and defense sales are seen as helping the group focus on its core strengths of information technology, financial services, construction and ship-building.

Hanwha Group, South Korea’s 10th-largest conglomerate, said separately the acquisitions would boost its petrochemicals and defense-related businesses, and add around 12 trillion won in sales based on 2013 figures.

Editing by Stephen Coates

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