Samsung announces second IPO of key affiliate to hasten succession

Samsung announces the second public offering this year of its key business unit to secure enough cash for heir-apparent Jay Lee's inheritance tax while his father remains in the hospital after a heart attack, reports ZDNet Korea's Cho Mu-hyun.
Written by Cho Mu-Hyun, Contributing Writer

Samsung Group has announced a public offering for one of its key affiliates for the second time this year, in what many believe is part of its push to hasten the succession plan following chairman Lee Kun-hee’s hospitalization.

Samsung Everland, the de facto holding company of the group, will go public within the first quarter of next year, the company said. It will select securities firms to manage the deal  in the next month.

Samsung Everland, a fashion business that's part of Korea’s largest conglomerate, is one of its most important as it is at the heart of Samsung's complicated web of cross-shareholding among affiliates.

Its circulatory shareholding structure allows the Lee family to own the entire group with a minimal number of shares.

Samsung Chairman Lee Kun-hee's heart attack and hospitalization has hastened the conglomerate's succession plan to his son Jay Lee (on right)

Jay Lee, vice chairman of Samsung Electronics and heir-apparent to the group, owns 25.1 percent of its share of Samsung Everland, and will be the biggest beneficiary from the public offering. His sisters Boo-jin and Seo-hyun each own 8.37 percent.

Samsung Everland’s public offering will likely shift the way Samsung controls its affiliates. Some speculate it may form a new holding company by combining parts of Samsung Electronics and Samsung Everland and end its current shareholding structure.

The siblings also own shares of Samsung SDS, an IT service affiliate of the group that is also preparing to go public. The younger Lee owns 11.3 percent of shares, and his sisters 3.9 percent each.

The combined cash the Lee family will secure through the two public offerings is expected to be between 5 trillion ($4.88 billion) to 7 trillion won ($6.82 billion), which will likely be used to pay the inheritance tax due by the younger Lee if his father dies, and also to buy stocks of certain affiliates to reinforce control. The elder Lee is worth some $12.6 billion and almost half of this is due as taxes under Korean inheritance law.

Samsung has made a number of major announcements since its 72-year-old chairman was hospitalized last month after a heart attack. It issued a formal apology and promised compensation to ex-employees and their families who claim they’ve contracted life-threatening diseases after working at Samsung’s facilities. Analysts say that move is to deflect any possible threat or criticism that may occur during its power transfer.

Prior to Lee's heart attack, the group also announced mergers of key business units to better take advantage of industry sector value chains. Commentators see this as a push to duplicate the success of Samsung Electronics, its flagship subsidiary, outside of the electronics industry.

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