Samsung Electronics Vice Chairman Lee Jay-yong (Photo:Samsung Electronics)

The new Samsung C&T, created through the merger of Cheil Industries and Samsung C&T, was inaugurated as the virtual holding company of Samsung Group, the nation’s largest conglomerate, on Sept. 1.

The merged company will make its debut on the global stage when it participates in the IFA 2015, being held from Sept. 4 to 9 in Berlin. The new Samsung C&T will showcase new garments and miscellaneous goods combining IT and fashion. It is rare in Korea and abroad that a fashion company participates in the IFA, one of the world’s largest IT fairs. The new Samsung C&T will have an exhibition space, part of Samsung Electronics’ pavilion, and President Yoon Joo-hwa and other ranking officials will tour the trade fair. The new Samsung C&T’s bold move may be construed as efforts to max out the synergic effects of the merged company, covering construction, trading, fashion, leisure, food & beverages and bio businesses. The fashion business division of the new Samsung C&T will display the “smart suit,” which is connected with a smartphone; “perfect wallet,” a wallet embedded with NFC; “body compass,” a smart shirt measuring heart beats and breaths; and an “on bag,” with such functions as mobile charging of smartphone and location tracking.

The new Samsung C&T ranks 4th with 27 trillion won in market capitalization, following Samsung Electronics, Hyundai Motor and KEPCO. 

The company aims at raising sales from 33.6 trillion won in 2014 to 60 trillion won in 2020 with the goal of becoming a global integrated company leader with such business portfolios as fashion, food, construction, leisure, and bio. The company set its new vision as “Global Business Partner & Lifestyle Innovator” and its top three growth momentums as continued B2B growth, the securing of global leadership, and attaining of new growth engines. 

The merged company, which has a 51 percent stake in Samsung Biologics, takes care of Samsung’s new breadwinner, bio business. Samsung Biologics has a target of chalking up 60 trillion won in sales and 4 trillion won in pretax profit by 2020. 

For the time being, the merged company has a structure of four divisions. construction, trading, fashion, resort/construction as it now goes, and the divisions are headed by current CEOs, including President Choi Chi-hoon of Construction Business and President Kim Shin of Trading Business, to stabilize its operations until a year-end annual regular reshuffle is conducted. 

The new Samsung C&T will operate a “synergy cooperation committee” comprising of the four CEOs. It has a staff of 12,500 employees  4,300 former employees of Cheil Industries and 8,200 former Samsung C&T officials. It is faced with manpower replacement and organizational optimization to improve efficiency. The old Samsung C&T’s construction division has a strong point in the EPC sector, while the old Cheil Industries has strengths in landscaping and energy fields, but the two companies have much overlapping in the construction business. 

The inauguration of the new Samsung C&T may be construed as the virtual completion of Samsung Electronics Vice Chairman Lee Jay-yong’s takeover of Samsung Group, business sources familiar to that matter said. 

The merger lowers Vice Chairman Lee Jay-yong’s stake in the merged entity from 23.2 percent to 16.5 percent, but it allows 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 results in the junior Lee’s solidification of his grip over Samsung Electronics. 

The consolidation makes the group’s circular equity investment structure simpler, as the new merged entity tops a two-track circular cross share holding structure one diverging into the new Samsung C&T-Samsung Life Insurance-Samsung Fire & Marine Insurance, Samsung Securities and Samsung Card structure, and the other covering the new Samsung C&T, Samsung Electronics, Samsung SDI, Samsung Electro-Mechanics and Samsung Heavy Industries & Construction structure. The consolidation brings changes to the stakes of the group’s owner family members. Lee Jay-yong’s stake in the new Samsung C&T falls to 16.5 percent, Lee Bu-jin’s interest and Lee Suh-hyun’s stakes drop to 5.5 percent, and the elder Lee’s stake falls to 2.9 percent. The owner family’s combined stake in the new entity stands at 30.4 percent.