Cue for revamp in Samsung ownership back in spotlight after Lee ascends to chair

A possible revamp in the ownership structure in Samsung Group is being watched after Jay Y. Lee has ascended to chair South Korea’s largest conglomerate two years after patriarch’s death.

Samsung Group is anticipated to change its ownership structure around Lee, who was officially appointed as the executive chairman of flagship Samsung Electronics last week. Lee had stayed as vice chairman of the tech giant and oversaw everyday affairs of Samsung Group since his father was hospitalized in 2014.

Yuanta Securities is anticipating changes possibly under two scenarios: Samsung C&T converting into the holding company of Samsung Group or Samsung Electronics being carved out.

Samsung Group is controlled by Lee family through Samsung C&T, Samsung Life Insurance, and Samsung Electronics.

Lee family owns combined 31.31 percent stake, including the largest 17.97 percent held by Jay Y. Lee, in Samsung C&T. The construction and general trading company has controlling stake in Samsung Life Insurance, the largest shareholder of Samsung Electronics. This allows Jay Y. Lee with only 1.63 percent stake in Samsung Electronics to wield command over the company.

Samsung Group is faced with the challenge of fixing its ownership structure due to a likely revision in local insurance business law. The current Insurance Business Act limits an insurance firm’s holding of stakes in other firms under the same parent at 3 percent of total assets based on acquisition cost. If the law is revised to set the limit based on market price of company shares, Samsung C&T will need to offload a 7.07 percent stake in Samsung Electronics held via Samsung Life Insurance and Samsung Fire & Marine Insurance.

Yunata Securities predict Samsung Group to divide Samsung Electronics into two units ? one for investment and the other for the operation of manufacturing chips, smartphone and other consumer electronics business operations. This will allow Samsung C&T become the holding company and the investment unit of Samsung Electronics an intermediate holding company, which then will control the tech firm’s business operations.

Samsung Group won’t likely rush. The legal revision will likely provide a 7-year grace period.

By Park Yoon-ye and Cho Jeehyun