Samsung Group Companies Tumble as Revamp Views Fuel Volatility

Samsung Group companies tumbled in Seoul trading amid concern a month-long rally fueled by speculation of a restructuring at South Korea’s biggest conglomerate has gone too far, too fast.

Samsung C&T Corp., which helped build the tallest building in Dubai, fell the most since November 2011 in Seoul, while the group’s flagship Samsung Electronics Co. posted its steepest decline in five months. Samsung Engineering Co. and Samsung Techwin Co., tumbled 4.5 percent and 2.9 percent respectively, while the benchmark Kospi index slipped 0.3 percent.

“Uncertainty coming from different scenarios of Samsung Group’s restructuring is adding volatility to the shares of Samsung units today, on top of some profit taking,” said Lee Jin Woo, who oversees about $7.2 billion at KTB Asset Management Co. in Seoul. “The South Korean stock market will remain volatile until a clear scenario is seen on the revamp.”

Samsung Group is unlikely to choose a holding company structure for its revamp, the Chosun Ilbo newspaper reported today, citing several Samsung officials it didn’t identify. A holding company would need at least 14 trillion won ($13.8 billion) to take over the Samsung Electronics stake held by Samsung Life Insurance Co., which would be a challenge for the group, the newspaper reported.

Samsung Group spokeswoman Rhee So Eui declined to comment.

Separately, the Maeil Business Newspaper reported today that Samsung Group is taking steps to transition into a holding company structure following last week’s announcement of its plan to list Samsung Everland Inc. The restructuring may include a merger of Samsung Everland and Samsung Electronics, or Samsung Everland and Samsung C&T, to form a holding company structure, the Maeil said on its website, without citing anyone.

Speculation that Samsung, South Korea’s largest family-run chaebol or conglomerate led by Lee Kun Hee, may revamp the group to retain family control lifted the market value of its 17 listed companies by more than $23 billion since May 7 through last week’s close. Some scenarios include the unwinding of cross shareholdings that have contributed to a cap on equity valuations in South Korea.

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