AsiaToday reporter Hong Sung-yool = As Samsung Group is pushing forward with internal restructuring, Samsung's third generation inheritance layout got subtly tangled. Due to Samsung General Chemicals' acquisition of Samsung Petrochemical, Samsung Group vice chairman Lee Jae-yong has developed influence on chemical sector, where his sister Lee Bu-jin, president of Hotel Shilla, was expected to take charge of.
However, financial circles see this is likely a passing phenomenon in the succession for the third generation of the owner's family. They observe that it is highly likely that the chemical sector will be transferred to president Lee in the long term as a part of Samsung Group's succession plan for Lee Jae-yong to be in charge of electronics and financial affiliates, Lee Bu-jin to handle hotel, construction and heavy chemical business and Lee Seo-hyeon, to be placed in charge of fashion and media fields.
Samsung Group has merged Samsung SDI and Cheil Industries on March 31, and merged Samsung General Chemicals and Samsung Petrochemical on April 2. Only two days after vertical integration of electronics business to enhance vice chairman Lee Jae-yong's position within the group, Samsung carried out pre-stop operation to hand over chemical sector to president Lee, the eldest daughter of Samsung Group chairman Lee Kun-hee.
Due to this restructuring, vice chairman Lee is now able to strengthen his governance in the chemical sector for a while. As vice chairman Lee is will be in charge of Samsung SDI, the largest shareholder of Samsung Group with 20.38% stake, the absorption of Cheil Industries, which has 23.39% shares of Samsung Petrochemical, will let him have an indirect influence on the chemical sector. As of December 2013, vice chairman Lee is the second largest shareholder with 0.57% stake of Samsung Electronics following chairman Lee Kun-hee with 3.38%.
Besides, Samsung SDI is the largest shareholder of Samsung C&T, the largest shareholder (38.68%) of Samsung General Chemicals and the second largest shareholder (27.27%) of Samsung Petrochemical. This will also strengthen vice chairman Lee's governance in the chemical sector, playing a factor of breaking the existing triangular structure of the third generation.
Unlike vice chairman Lee, president Lee seems to have lost her position as the largest shareholder of chemical affiliates and her governance over the chemical sector seems have weakened. This is because president Lee came to hold only 4.91% of Samsung Petrochemical with the Samsung General Chemicals-Samsung Petrochemical merger. She stepped down to the sixth largest shareholder of merged company from the largest shareholder of Samsung Petrochemical. The shareholders of the merged company include Samsung C&T (36.99%), Samsung Techwin (22.56%), Samsung SDI (9.08%), Samsung Electro-mechanics (8.91%), and Samsung Electronics (5.28%).
Apparently, president Lee seems to be losing her ground in the group due to the restructuring. However, many see this is highly likely a part in the succession for the third generation.
Samsung's third generation inheritance layout is expected to shape up after Samsung C&T's business restructuring. Samsung C&T is the key affiliate for president Lee to take over the chemical and construction sectors. This is because Samsung C&T is the largest shareholder of the merged company of Samsung General Chemicals and Samsung Petrochemical and also, is the second largest shareholder (7.81%) of Samsung Engineering, the construction unit.
As a result, Some expect that Samsung C&T will separate its trading and construction sectors and its construction sector will be merged with Samsung Engineering. There is a sign of business restructuring in the construction sector as Samsung C&T purchased all the shares (2,036,966 shares) of Samsung SDI's shares of Samsung Engineering last year, becoming the second largest shareholder.
Since Samsung SDI sold all of its shares of Samsung Engineering, it is likely to dispose Samsung Engineering's shares to be obtained from Samsung SDI-Cheil Industries merger. However, the key is how it will dilute the shares in the future during the process of merging and splitting Samsung C&T.
Naturally, Samsung Group stresses that the restructuring has nothing to do with the succession. An official of Samsung Group said, "The group went through internal M&A for business efficiency. As long as I know, other variables such as management succession are not taken into account."
