Samsung Electronics Vice Chairman Lee Jay-yong, the heir-apparent and only son of the ailing Samsung Group Chairman Lee Kun-hee, moved closer to taking the helm of the conglomerate. Cheil Industries and Samsung C&T Corp., the two key affiliates of Korea’s largest conglomerate, agreed on the merger of the two companies at separate board of directors’ meetings on May 26.
The merger is to be completed by Sept. 1 after it is approved by each of shareholders’ meetings of the companies. The consolidation will create a massive integrated service provider covering trading, construction, fashion, resorts and food & beverage businesses that amount to a combined 34 trillion won as of the end of last year.
Cheil Industries, formerly known as Samsung Everland Co., is the de facto holding company of Samsung Group, and Samsung C&T Corp. is the group’s trading & construction unit.
Under the merger agreement, pending approval from the two companies’ shareholders, Cheil Industries said in a release that the company will acquire Samsung C&T by offering 0.35 new shares for every Samsung C&T share, officials said. The name of the new corporate entity will be Samsung C&T, named after the group’s first founding company established in 1938.
The merger will lower the junior Lee’s stake in the merged entity from 23.2 percent to 16.5 percent, but it will allow him to secure Samsung C&T Corp.’s interests in the group’s key affiliates. Now that Samsung C&T owns a 4.1 percent stake in Samsung Electronics and a 17.1 percent interest in Samsung SDS, the merger will result in the junior Lee’s solidification of his grip over Samsung Electronics.
Currently, the junior Lee has no shares in Samsung C&T Corp. He took over as chairman of the Samsung Life Public Welfare Foundation and chairman of the Samsung Foundation of Culture — two of the three figurehead positions his father Lee Kun-hee possesses — on May 15. The junior Lee is expected to accelerate his efforts to ante up his interests in key affiliates of the group.
The elder Lee is reportedly in stable condition after being hospitalized for a stroke, but it is not clear when he would be able to return to his management roles.
The consolidation will make the group’s circular equity investment structure simpler, as the new merged entity will lead the Samsung C&T-Samsung Life Insurance-Samsung Electronics circular equity investment structure. The consolidation will bring changes to the stakes of the group’s owner family members. Jay-yong’s stake in the new company will fall to 16.5 percent, Lee Bu-jin’s interest and Lee Suh-hyun’s stakes will drop to 5.5 percent, and the elder Lee’s stake will fall to 2.9 percent. The owner family‘s combined stake in the new entity will stand at 30.4 percent.
Samsung Group said Samsung C&T’s aim will be to raise sales to 60 trillion won in 2020 by strengthening its global competitive edge and maximizing synergetic effects. Samsung C&T will participate in a bid to nurture the bio industry as one of the group’s new growth engines as the largest shareholder.
Lee Jae-yong’s Management Leadership in Spotlight
One year has passed since Samsung Group Chairman Lee Kun-hee left management following a stroke he suffered on May 10. The group has shifted to a management mode in which Samsung Electronics Vice Chairman Lee Jae-yong, heir-apparent, fills the leadership vacuum in the chairman’s absence.
Samsung Electronics, the flagship company of Samsung Group, is cruising. The company has made an aggressive turnaround by logging 6 trillion won in operating profit in the first quarter of this year. Samsung Electronics is also engaging in aggressive M&A activity to focus on its mainstay businesses, a sign the company is on a roll under the stewardship of Vice Chairman Lee. The junior Lee has emphasized tactics surrounding globalization, pragmatism, filed management, rationalism, youth and communication.
Vice Chairman Lee is considered the most active executive in Korea, as illustrated by recent meetings with foreign IT company CEOs to expand global networks. He is credited with enhancing Samsung Electronics’ global standing through exchanges with foreign CEOs.
The conglomerate’s heir-apparent has begun high-profile management activities.
Vice Chairman Lee has been expanding his scope of management activities to most of the company’s divisions in recent months. Vice Chairman Lee met with Chinese President Xi Jinping four times after he encountered President Xi on a visit to Seoul last July. Lee also met with Google CEO Larry Page and Apple CEO Tim Cook while attending the Allen & Co. Conference in Sun Valley, the United States, last July. Lee, held talks with Facebook CEO Mark Zuckerberg at the former’s office in Seoul on Oct. 14 and discussed ways of promoting cooperation.
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