Samsung’s share shifting shows control go to Jay Y.The announcement earlier this month that Samsung Engineering will be merged into Samsung Heavy Industries threw off many market experts, who were betting the struggling engineering company would become part of the group’s construction business.
Before then, the most common prediction of how Samsung Group would be divided in the post-Lee Kun-hee era was that the eldest son, Jay Y., would take over Samsung’s biggest cash cows - electronics and finance - while his younger sibling, Boo-jin, would get the family’s businesses in retail, construction and heavy industries and chemicals. The youngest, Seo-hyun, was expected to head the family’s media and fashion business.
The speculation was further cemented when Samsung C&T, expected to land in Boo-jin’s lap, began increasing its shares in Samsung Engineering in July last year. The company became the second-biggest stake holder after Cheil Industries, buying Samsung SDI’s 5.09 percent stake in December; bringing the shares to 7.81 percent.
Following the script, Samsung Engineering should have merged with Samsung C&T. But with the turn of events, the market’s speculation has also changed. Now it seems the eldest will be taking a larger piece of the pie, with the construction business also going to him.
Through the merger, the stake owned by the heavy industries’ majority shareholder, Samsung Electronics will be 12.5 percent. The second-largest shareholder will be Samsung SDI with 4.1 percent.
By shares, Jay Y. doesn’t have a controlling stake in the nation’s biggest tech company - he only owns 0.57 percent. But through a complicated web of stock ownership among affiliates, the heir apparent actually owns both Samsung Electronics and SDI.
As a result, the sister, Boo-jin, is expected to take Samsung C&T’s trading business.
Since late last year, Samsung Group has been accelerating its biggest overhaul since Chairman Lee Kun-hee took the helm in 1987.
The transition gained momentum when Samsung announced its plans to split the fashion unit of Cheil Industries and merge it with Samsung Everland, while further strengthening the company’s material development business in September last year.
That material development unit of Cheil Industries was then merged into Samsung SDI in March. The following month, Samsung combined Samsung General Chemicals with Samsung Petrochemical. The name Samsung Everland was then changed to Cheil Industries in June.
The listing of Samsung SDS and Cheil Industries, which the conglomerate is pushing for within the year, are also thought to be a move toward increasing Jay Y.’s stakes.
The Lee family actually controls the entire Samsung empire through its majority stake in Cheil Industries. Jay. Y owns the biggest share, 25.1 percent, while his two sisters each own 8.37 percent. Their father holds 3.72 percent stake.
As Jay Y.’s influence within the conglomerate is expected to expand, there has also been growing interest as to what will happen to the spouses of his younger sisters.
The most interesting future is that of Kim Jae-youl, the CEO of Samsung Engineering.
Kim, who is the son of the late Chairman of Dong-A Ilbo Kim Byung-kwan, is married to the youngest of Chairman Lee’s children, Seo-hyun. Kim spent most of his career at Cheil Industries and was named CEO in charge of management and planning at Samsung Engineering in 2011. Because he lacks experience in construction, shipbuilding and offshore plants, market experts say it is unlikely that he would be named as the new head of the merged enterprise. It is more likely that he will be placed in an important position at another Samsung affiliate due to his connections in the business community.
The spouse of Boo-jin is expected to see his position within the Samsung conglomerate further shrink. Im Woo-jae is Vice President at Samsung Electro-Mechanics, which is one of the main suppliers of Samsung Electronics.
Considering that Jay Y.’s control of the electronics business is due to expand, there is speculation that Im will likely be repositioned to a Samsung businesses that Boo-jin controls, such as Hotel Shilla or the trading operation of Samsung C&T.
Industry sources say the position of Chairman Lee’s sons-in-law as well as the general framework of how the conglomerate will be split will likely be revealed by the end of the year.
BY LEE HO-JEONG [email@example.com]