Tuesday, 29 November 2016

Samsung Electronics Eyes Separation as Investor Pressure Builds

Samsung Electronics Co Ltd, under pressure from shareholders to improve investor returns, said on Tuesday it was considering splitting the tech giant into two in what would be the biggest shake-up in its 47-year history.


The move and a plan to raise dividends come after U.S. hedge fund Elliott Management in October called for the South Korean firm to split itself into a holding vehicle and an operating company.


However, the world’s top maker of smartphones, memory chips and televisions, said it was “absolutely neutral” about whether to proceed and provided little detail on the potential restructuring, underwhelming investors.


“The review does not indicate the management or the board’s intention one way or another,” the company said in a statement, adding it had hired external advisers for a review expected to take at least six months.


Shares in Samsung, worth $224 billion combined, finished unchanged on the day at 1.677 million won ($1,434) each. The 2016 dividend boost fell short of some expectations, while uncertainty over the restructuring kept investors at bay, analysts said.


“There is some disappointment that the dividend wasn’t even higher or possibly a special dividend and this is the reason for a flat share price today,” said Sat Duhra, asset manager at Henderson Global Investors.


Samsung did not directly mention Elliott in its statement, but the South Korean firm promised to respond to the fund’s ideas by the end of November.


Samsung pledged to return 50 percent of free cash flow to shareholders for 2016 and 2017, falling short of Elliott’s call for 75 percent to be returned and to pay a $26 billion special dividend.


Samsung rejected another Elliott proposal by saying that even if it adopts a holding company, it has no plans at present to merge that with Samsung C&T Corp, the group’s current de facto holding company.


“I don’t think Samsung said much that was surprising or beyond what investors already had in mind,” said HDC Asset Management fund manager Park Jung-hoon.


Tuesday’s announcement came as the electronics giant is seeking to ensure a smooth succession to Lee Jae-Yong, the firm’s vice chairman and scion of the parent Samsung group’s founding Lee family.


It is also struggling to contain the fallout from a global recall of its Galaxy Note 7 smartphone caused by exploding batteries as well as a snowballing political scandal in South Korea.



Samsung Electronics Eyes Separation as Investor Pressure Builds

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