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Shares of Samsung parent group and its affiliates jumped as a major restructuring will help to strengthen holding company Samsung C&T’s control over Samsung Electronics – the manufacturer of smartphones and chipsets.
On Monday, October 26, the shares of Samsung Electronics Co Ltd (KRX: 005930) and its other affiliates surged north, a day after the reports emerged that its Chairman Lee Kun-hee passed away on Sunday. Lee Kun-hee has been credited for turning Samsung into a global conglomerate and technology giant.
Lee, who passed away had his family beside him, including his son and Samsung Vice Chairman Jay Y Lee. The markets, however, responded positively to the hopes of restructuring and stake sales, as per the analysts.
Samsung Global shares jumped 1% today morning, Samsung SDS shares were up by 8.12%, Samsung C&T jumped 17.31%, Samsung Life Insurance 5.86%, Samsung Engineering 0.45%, and Samsung BioLogics 0.47%.
Investors have been predicting that such a measure might attract a hefty inheritance tax to the tune of 10 trillion won ($8.9 billion). However, analysts also seem to remain divided on this matter. NH Investment Securities analyst Kim Dong-yang said that “the inheritance tax is outrageous, so family members might have no choice but to sell stakes in some non-core firms” such as Samsung Life.
Investors have also been long anticipating this shake-up in case of Lee’s death. This is because this shake-up will help to strengthen holding company Samsung C&T’s control over Samsung Electronics. After the death of Samsung founder Lee Byung-chul in 1987, his son Kun-hee took the reins of the company. Kun-hee also holds the credit of putting Samsung on a global map over the last three decades.
Suspicion around Jay Y Lee’s Taking Over while Samsung Shares Are Up
Everyone is looking at the next set of developments of who will be taking the Samsung throne. Jay Y Lee is the apparent heir as the Samsung Chairman. Jay Lee has a 17.3% stake in the holding company Samsung C&T, which, in turn, has a 5.01% stake in Samsung Electronics – the world’s leading manufacturer of smartphones and memory chips. KB Securities analyst Jeong Dong-ik said:
“At this point, it is difficult to expect when Samsung Group will kick off with a restructuring process as Jay Y. Lee is still facing trials, making it difficult for the group’s management to begin organisational changes”.
Jay Lee is still facing charges and trials linked to a 2015 merger. The Samsung heir faces charges of fraud and stock price manipulation. SK Kim, executive director and analyst at Daiwa Securities told CNBC:
“Now the market is interested in the impact from the succession because of Jay Y. Lee. He is the de facto leader of the Samsung group. He is a major shareholder of Samsung C&T and Samsung SDS, so market reacted positively on the news.”
Well, the recent developments will be crucial to South Korea’s economy considering Samsung is one of the largest conglomerates in the country.