Samsung’s Cheil Industries Surges on Trading Debut in Seoul

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Cheil Industries Inc., the de facto holding company of Samsung Group, more than doubled from its initial public offering price after selling stock at the top of the marketed range.

The shares opened at 106,000 won, up from the 53,000 won price in the IPO, and closed at 113,000 won in Seoul. The stock has an average 12-month price target of 88,500 won, according to four analyst ratings compiled by Bloomberg. The benchmark Kospi index fell 0.1 percent today.

Cheil’s 1.52 trillion won ($1.4 billion) IPO is part of a restructuring by the family that controls South Korea’s largest conglomerate, or chaebol. Taking Cheil public is a step toward helping Lee Jae Yong take the reins of Samsung Group after his 72-year-old father Lee Kun Hee was hospitalized in May.

“An investment into this company means an investment into the whole group,” Huh Nam Kwon, chief investment officer at Shinyoung Asset Management Co., which oversees about $11 billion, said by phone. Huh bought Cheil shares in the IPO. “The Lee family still own the majority of Cheil and they’re highly likely to try to lift its corporate value. This is a stock to hold for a long period,” he said.

The Lees are revamping an empire that spans smartphones, TVs and insurance. After the issue of new shares, Lee Jae Yong owns about 23 percent of Cheil and his two sisters each have stakes of about 7.8 percent in the operator of theme parks and zoos that helps them control South Korea’s biggest chaebol, according to filings.

Group Head

Cheil, formerly known as Samsung Everland Inc., said in June it was seeking to go public to help overseas expansion and improve management transparency. The company sits atop the group via direct and indirect stakes in affiliates including Samsung Electronics Co. and Samsung Life Insurance Co.

Samsung SDS Co., a provider of technology for the construction and manufacturing industries, last month completed its own IPO and surged 72 percent when the stock made its debut Nov. 14.

In order to take control of Samsung Group, Lee Kun Hee’s three heirs face inheritance taxes that could exceed $5 billion for their father’s $12.7 billion fortune.

“Samsung Electronics is the most important company at Samsung Group, so how much of a stake in Electronics that Cheil can secure is the key to stabilizing the Lee heirs’ control over the entire group,” Lee Sang Hun, a Seoul-based analyst at HI Investment & Securities Co., said by phone after trading.

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

President Park Geun Hye’s government 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.

“There are many possible scenarios about Samsung’s structural shake-up, but the sure thing is that the value of Cheil, in which the Lee family owns the biggest holdings, will be maximized,” E*Trade Korea Co. said in a Nov. 26 report.