Samsung Still Mulling Holding Company Even With Heir Arrested

  • Samsung heir Jay Y. Lee standing trial over bribery charges
  • Proposal follows push for change by activist investor Singer

Samsung Electronics Co. isn’t letting the arrest of de facto head Jay Y. Lee stop it from considering strategic moves, with the technology giant continuing to evaluate a potential holding company structure.

The idea was first announced in November after pressure from activist investor Paul Elliott Singer for changes at the world’s biggest maker of smartphones and TVs. The proposal included the combination of some businesses under a holding company that would allow Samsung’s founding Lee family to maintain their influence.

“We are conducting a thorough review of the optimal corporate structure, including the possibility of creating a holding company,” Samsung said Tuesday in an email. “The process is expected to take a certain period of time and we will provide an update when available.”

Jay Y. Lee, vice chairman of the company and grandson of Samsung Group’s founder, is in detention as he faces charges including bribery and embezzlement, allegations he has denied. Samsung stocks rose after local media, including Yonhap News, quoted Chief Financial Officer Lee Sang-hoon as saying the company would review shifting its operations into a holding company. Samsung Electronics rose 1.9 percent to a record high close. Samsung C&T Corp. climbed 9.1 percent and Samsung Life Insurance Co. gained 4.6 percent

“The sense of anticipation seems to rise about restructuring the governance structure after the CFO comment was reported,” said Michael Na, an analyst at Nomura Financial Investment Korea Co.

The Lee family has maintained control of the Samsung conglomerate for decades through a complicated web of cross-holdings. It’s also faced criticism in recent years that the system stifles competition and undermines corporate governance.

Lee is being accused of bribing a friend of former President Park Geun-hye in return for government backing for a 2015 merger that helped him tighten his grip on Samsung. Samsung has said court proceedings will reveal the truth while his lawyers said he has done nothing wrong.

Under the plan proposed by Elliott, Samsung would split into holding and operating companies, and Samsung C&T, which currently owns more than 4 percent of Samsung Electronics, would be merged into the new holding company. That would allow Lee to use his stake in C&T to solidify his position without a massive cash outlay.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE