Samsung begins untying its knotty governance

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Samsung begins untying its knotty governance

Samsung SDI reported that it will sell all of its holdings in its construction affiliate Samsung C&T in the conglomerate’s latest effort to untie its labyrinthine cross-shareholding structure.

The company said in a regulatory filing on Tuesday that it will sell the roughly four million shares it holds in Samsung C&T in a block deal before the stock market opens today.

Block deals are a way of selling shares in bulk outside of the stock market’s opening hours to minimize the impact of the sales on the market index.

Industry analysts expect that the sale is only the beginning of the chaebol’s moves to reform its complicated corporate governance structure.

The Fair Trade Commission concluded last year that SDI, Samsung’s battery making unit, should offload all its holdings in Samsung C&T after Cheil Industries and Samsung C&T merged in 2015.

Samsung SDI already sold off the five million shares it used to hold in Cheil Industries right after the merger per the commission’s orders. The anti-corruption watchdog turned over its decision last year and said Samsung SDI needs to discard all its holding shares in Samsung C&T to completely untie the cross-shareholding relationship.

The deal is being processed by Citigroup Global Markets Korea Securities and Credit Suisse Securities, according to Samsung SDI. The shares are priced at about 582.2 billion won ($544.6 million) based on the market closing price Tuesday.

Though the final deadline was set for Aug. 26, the battery maker moved faster, as it was reportedly pushed by Samsung’s de facto leader Lee Jae-yong.

After Lee was released from jail in February, reforms in Samsung’s corporate governance can speed up to simplify the web that links seven of its affiliates.

Samsung Electro-Mechanics and Samsung Fire & Marine Insurance will also likely sell off their shares in Samsung C&T soon, according to analysts. However, the biggest task Samsung has in front of it to completely break the ties between seven Samsung affiliates is selling off the Samsung Electronics’ shares held by Samsung Life Insurance and Samsung Fire & Marine Insurance.

As that process calls for a large amount of capital, it is yet unclear how the chaebol will remove its cross-shareholding structure while at the same time retaining the Lee family’s solid control over the group.

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