Samsung SDS Files for $1.1 Billion IPO Amid Restructure

Samsung SDS Co., a provider of technology services, filed for a 1.16 trillion won ($1.1 billion) initial public offering as South Korea’s largest business group restructures.

Stock will be sold in the range of 150,000 won to 190,000 won, according to a prospectus filed with South Korean regulators. The unit applied for preliminary approval to list with the Korea Exchange on Aug. 25.

The listing is another step in helping Lee Jae Yong, the heir apparent to South Korea’s most powerful chaebol, restructure Samsung Group to retain control after his 72-year-old father Lee Kun Hee was hospitalized in May. The conglomerate, with interests spanning televisions and smartphones to insurance and construction, is merging shipbuilding and engineering affiliates.

“By filing the IPO prospectus today, Samsung Group will be able to get Samsung SDS listed by the end of the year,” Chae Yi Bai, a researcher at Center for Good Corporate Governance, a chaebol watchdog, said by phone before the filing. “The company is moving as fast as it can to prepare for after Chairman Lee’s death.”

In June, Cheil Industries Inc., the de facto holding company of Samsung Group, announced it was planning to list shares by the first quarter of next year. Cheil’s listing means the structural change and power shift to a younger generation has started and will accelerate, according to Lee Sang Hun, a Seoul-based analyst at HI Investment & Securities Co.

Inheritance Taxes

The 6.1 million shares being sold in the IPO are currently owned by Samsung Electro-Mechanics Co., according to the filing.

In order to take control of Samsung Group, Lee’s three heirs face inheritance taxes that could exceed $5 billion for their father’s $11.2 billion fortune.

Political pressure is also mounting on the group to unwind a web of cross-shareholdings that allow the family to maintain control of about 70 companies with less than a 2 percent total stake.

President Park Geun Hye’s government has banned the creation of new cross-shareholdings and offered tax breaks for restructuring as part of measures to improve corporate governance and make the family-run chaebol business groups more transparent.

The Samsung SDS IPO may help Lee Jae Yong, who owns more than 11 percent of the company, pay the inheritance tax on assets passed down from his father, according to corporate watchdog CEOSCORE.

Samsung Heavy Industries Co., the world’s third-largest maker of ships, and Samsung Engineering Co. have said they will merge before the end of the year in a deal valued at about 2.5 trillion won.

Korea Investment & Securities Co. and Goldman Sachs Group Inc. are joint lead managers for the listing, while JPMorgan Chase & Co. is also helping arrange the sale, according to the filing today.

Samsung SDS provides technology for the construction and manufacturing industries.

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