Samsung Electronics announced on Tuesday it is considering splitting itself into a holding company and an operating company in order to boost shareholder value, in what could be the biggest shake-up in the South Korean tech giant’s history.
According to Reuters, the move is part of a bid to improve investor returns after Samsung came under pressure from shareholders to simplify its business structure. Critics argue that the current structure makes it difficult to value Samsung since its assets are spread across various sister companies and affiliates. Establishing a separate holding firm would bring these under one name, improve transparency, and make it easier to value Samsung Electronics’ business.
Samsung said it would also increase returns to shareholders by one third and accelerate its share buy-back program. The plans come after U.S. hedge fund Elliot Management, which owns 0.6 percent of Samsung, called for a managed split of the company last month.
A split in two of the company has been a subject of speculation among market analysts for a while and would allow Samsung to list on additional stock exchanges around the world. However, some say any potential split could hand more control back to the original family owners and be a particularly favorable outcome for Samsung heir apparent Lee Jae-Yong, who was recently nominated for a seat on the company board.
Despite the announcement, Samsung offered little detail on the potential restructuring and said it was “absolutely neutral” about whether to proceed. “The review does not indicate the management or the board’s intention one way or another,” said the company in a statement, adding it had hired external advisers for a potentially six month-long review process.
While Samsung moves to assuage investor concerns, the company still has to win back confidence in its consumer mobile division after its disastrous Galaxy Note7 recall in early September. Samsung’s share of the smartphone market dropped in the third quarter of 2016 to its lowest level in nearly two years, with financial results for the fourth quarter expected to suffer more after the subsequent discontinuation of the flagship phone.
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