Samsung creates task force to secure merger

Samsung Group launched a task force to oversee the mega merger between Samsung C&T and Cheil Industries, a complicated aligning of expansive businesses and numerous legal and employment issues.

The move follows the group’s decision on May 26 to merge Cheil Industries, Samsung’s de facto holding company, with Samsung C&T, the conglomerate’s construction arm. Cheil will acquire the construction company, though the combined unit will use Samsung C&T as its brand name.

Once combined, the business interests of the new Samsung C&T will range from construction and trade to fashion and leisure.

The task force consists of 10 members, with one executive from each Samsung Group company. The team had its first meeting on May 29 at Samsung C&T’s headquarters in Seocho-dong, southern Seoul.

The group will work until August, since the merger is scheduled to finish by Sept.1.

The process will carry weight, as the merger is considered a key maneuver to help Jay Y. Lee, the only son of ailing Chairman Lee Kun-hee and the largest shareholder in Cheil, extend his influence over the group.

Analysts have predicted that Samsung will simplify its complex web of cross-shareholdings around major affiliates Cheil Industries, Samsung Electronics and Samsung Life Insurance to help Lee’s three children - especially the son - exert influence and efficiently manage diverse businesses.

In that respect, the merger appeared to serve its purpose since the son will become the largest shareholder of the new unit, whose combined sales reached 34 trillion won ($30.5 billion) in 2014.

This doesn’t necessarily mean that the transaction will be smooth.

Samsung has a board meeting in July where major shareholders from the two companies are expected to officially approve the deal.

“Though chances are the board members could approve the merger, nothing is certain because some say that the share exchange can be unfair for shareholders of Samsung C&T,” said an analyst from SK Securities who asked for anonymity due to the sensitivity of the issue.

Cheil Industries, whose interests encompass fashion and leisure businesses, will offer 0.35 shares for each Samsung C&T share.

The task force will also be responsible for reorganizing divisions of the merged unit. Of the 60 trillion won, the group expects the construction division to account for the highest share, with an estimated 23.6 trillion won, followed by trade division taking up 19.6 trillion won.

The company estimates the fashion business to be the third-largest revenue source, with 10 trillion won in sales in 2020.

This indicates Samsung’s ambition to grow its fashion business because its current revenue stands at near 2 trillion won as of 2014.

“This is related to Cheil’s strategy to target Chinese consumers,” said the analyst.

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BY PARK EUN-JEE [park.eunjee@joongang.co.kr]