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- Samsung SDS Split Rumored: "IT to Electronics, Logistics to C&T" as Holding Company Transition Looms
- Amid speculation about a "management crisis," Samsung Group is reportedly revisiting the idea of restructuring its governance through the split and merger of Samsung SDS, a move last considered eight years ago.
Industry analysts suggest that Samsung SDS’s IT division could merge with Samsung Electronics, while its logistics division might merge with Samsung C&T, bolstering Chairman Lee Jae-yong’s and the Samsung family’s control over the group.
In 2016, Samsung attempted a similar restructuring of Samsung SDS. However, the plan was halted when Lee, then Vice Chairman, became embroiled in the "Choi Soon-sil Gate" political scandal.
On November 20, reports from the investment banking (IB) sector indicate that recent discussions have centered on the possibility of a small-scale merger between Samsung Electronics and Samsung SDS. The proposal under consideration involves splitting Samsung SDS into two entities: merging the IT division with Samsung Electronics and the logistics division with Samsung C&T. This would pave the way for Samsung C&T to acquire Samsung Life’s stake in Samsung Electronics, transitioning Samsung C&T into a holding company.
Samsung SDS could be split into IT and logistics divisions, with the logistics division merging with Samsung C&T. This would enable the utilization of Samsung SDS’s cash reserves, estimated at KRW 5.3 trillion (approximately USD 3.8 billion).
In 2024, Samsung SDS is projected to generate KRW 6.5 trillion (USD 4.6 billion) in revenue from its IT division and KRW 7.3 trillion (USD 5.3 billion) from its logistics division. Operating profits are expected to reach KRW 800 billion (USD 578 million) for IT and KRW 140 billion (USD 101 million) for logistics.
Merging the IT division with Samsung Electronics would further strengthen Chairman Lee Jae-yong’s and Samsung C&T’s control over Samsung Electronics.
Samsung Electronics is the largest shareholder of Samsung SDS, holding a 22.58% stake. Chairman Lee and Samsung C&T also own 9.2% and 17.98% of Samsung SDS, respectively.
Samsung previously attempted to split Samsung SDS in 2016. At the time, Samsung SDS sought external advice to explore the spin-off of its logistics division, which was seen as a precursor to restructuring the group’s governance.
However, plans were abandoned due to resistance from some shareholders of Samsung SDS, coupled with the dissolution of Samsung’s Future Strategy Office following the 2017 political scandal involving the Choi Soon-sil case.
In subsequent years, Chairman Lee faced legal challenges related to the alleged unfair merger of Samsung C&T and Cheil Industries, making it difficult to revisit plans for splitting and merging Samsung SDS.
If the appellate court delivers a "not guilty" verdict in February 2025 regarding the Samsung C&T-Cheil Industries merger trial, it is expected that the stalled governance restructuring plans for Samsung could resume.
A Samsung Electronics official commented on the possibility of splitting and merging Samsung SDS, stating, "This is not something we are aware of."
#Samsung #SamsungSDS #SamsungC&T #governancerestructuring #LeeJaeyong #corporategovernance #ITdivision #logisticsdivision #SamsungElectronics #Koreanbusiness
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- Posco Subcontractor Union Holds Rally in Seoul: "Chairman Chang In-hwa Must Directly Participate in Wage Negotiations"
- On November 20, the Posco Subcontractor Union in Gwangyang, part of the Korea Metal Workers' Union, held a rally in front of the Posco Center in Gangnam, Seoul, protesting the company’s reliance on internal subcontracting practices.
The union claimed that due to Posco’s refusal to engage in direct negotiations, this year’s wage and collective bargaining discussions have been held with subcontractor companies. However, they alleged that Posco, as the main contractor, interferes behind the scenes, obstructing meaningful progress.
A union representative stated, "We have held 15 rounds of negotiations with subcontractor companies for the 2024 wage and collective bargaining agreement, but no progress has been made. This is because subcontractor companies cannot make any decisions without Posco’s approval."
The union further argued, "The company’s purpose for employing approximately 20,000 internal subcontractor workers is clear. By maintaining discriminatory practices, Posco saves approximately KRW 30 million (USD 21,600) in annual wages per worker. This amounts to KRW 600 billion (USD 432 million) annually, KRW 6 trillion (USD 4.32 billion) over ten years, and KRW 12 trillion (USD 8.64 billion) over 20 years."
They also accused Posco’s subcontracting practices of being disguised outsourcing. They highlighted that since August 2004, complaints and lawsuits filed with the Ministry of Labor have resulted in Supreme Court rulings from 2022 affirming Posco as the actual employer of internal subcontractor workers.
A union representative explained, "The company has insisted that they do not have direct employment contracts with internal subcontractor workers and that subcontractor companies are independent entities. However, the court has ruled that Posco is the actual employer."
The union criticized the arrangement forcing them to negotiate with subcontractor companies as deceptive. "Posco Group Chairman Chang In-hwa must take responsibility and directly participate in the negotiations," they demanded.
#Posco #ChangInhwa #subcontracting #laborunion #workerprotests #Koreanlaborlaw #wagebargaining #employmentrights #disguisedoutsourcing #workerjustice
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- Lee Jay-hyun of CJ Group Prioritizes Future Investments, Letting Go of Low-Growth Businesses
- Lee Jay-hyun, chairman of CJ Group, appears to be focusing on investments for the future.
This is reflected in moves to sell off even profitable businesses if high growth potential seems uncertain. The review of the sale of CJ CheilJedang’s bio business division is seen as an example of this strategy.
If Chairman Lee sells CJ CheilJedang’s bio business division, it is expected to bring in substantial cash, which could be used for investments in CJ CheilJedang’s food business or in red bio, one of CJ Group’s future growth engines.
According to market analysts on the 19th, CJ CheilJedang’s review of selling its bio business division is widely seen as an effort to secure funds for new growth investments.
The corporate value of CJ CheilJedang’s bio business division is estimated to be around KRW 6 trillion (USD 4.3 billion) in the market. This is approximately 9.4 times the expected EBITDA for the bio business division this year.
If the bio business division is successfully sold, CJ Group would have enough funds to acquire multiple large companies in one go.
CJ Group’s most expensive acquisition to date was the purchase of Schwan’s, a major frozen food company in the U.S., in 2019 for KRW 2.8 trillion (USD 2 billion).
At the price currently discussed in the market, CJ CheilJedang could acquire two companies of Schwan’s scale and still have funds left. Successfully acquiring high-growth companies could give CJ CheilJedang an opportunity to make another leap forward.
CJ CheilJedang made a significant mark in the U.S. market through the Schwan’s acquisition. The company’s revenue in the U.S., which stood at approximately KRW 364.9 billion in 2018, surged to KRW 4.3807 trillion in 2023.
This is why there is speculation that CJ CheilJedang might be reviewing mergers and acquisitions to find a "second Schwan’s."
As CJ CheilJedang is the selling entity, it is expected to prioritize identifying acquisition targets that can generate the most synergy with its core food business.
It has become increasingly critical for CJ CheilJedang to find a growth breakthrough for its food business division. The food business is divided into processed foods (home meal replacements, dumplings, frozen meals, Hetbahn, etc.) and ingredients (flour, cooking oil, etc.). While there has been some growth in processed foods, the ingredients business has been shrinking.
CJ CheilJedang’s ingredient sales have declined for three consecutive quarters this year, with the drop offsetting the revenue growth in overseas markets, creating a drag on overall performance.
Considering external conditions, CJ CheilJedang seems to be at a favorable moment to find new opportunities abroad.
Global attention to K-food and K-culture has boosted the popularity of CJ CheilJedang’s products. By preparing an environment to quickly expand the distribution of its food products internationally, CJ CheilJedang could reverse its somewhat stagnant performance trends.
There are also opinions that Chairman Lee might use the funds from selling the bio business division for group-wide investments. This includes funding CJ Bioscience, one of CJ Group’s emerging growth drivers.
CJ Bioscience is a company within CJ Group that focuses on the microbiome industry. Given that CJ CheilJedang is its parent company, it is likely that part of the funds could flow into CJ Bioscience.
The fact that CJ Bioscience’s stock price hit its upper limit on the 19th reflects these expectations.
Chairman Lee’s decision to sell CJ CheilJedang’s bio business division is somewhat surprising.
The bio business division has been a central pillar of CJ Group’s three major bio businesses.
CJ Group has been fostering three key bio sectors: green bio (agriculture-related), white bio (chemical product-related), and red bio (life science-related). The green bio business, which CJ CheilJedang has developed through its bio division, has been considered a core and profitable area for the company.
In the past, the bio business division reliably generated approximately KRW 4 trillion in annual revenue and over KRW 500 billion in operating profit.
However, the inability to guarantee high growth seems to have influenced Chairman Lee’s decision to sell.
According to CJ CheilJedang, five of the eight amino acids sold by the bio business division are global market leaders. Although it has strong global competitiveness, there are vulnerabilities due to price wars initiated by Chinese companies.
Last year, the bio business division generated KRW 80.4 billion in operating profit, down 80.4% from 2022.
Although operating profit has rebounded this year, industry insiders note that the risk remains high, as it is unclear when Chinese competitors might launch another price war.
Indeed, major amino acid companies in Germany and Japan have exited the business in recent years due to price pressures from China.
CJ CheilJedang’s intention to sell the bio business division appears to be very strong.
It is reported that CJ CheilJedang has already relocated some staff from the bio business division to other departments in preparation for the sale. Employees remaining in the bio business division are said to be concerned about their future.
However, there are doubts that a domestic company would be able to step in as a buyer. The risks are high, and there are few companies in Korea capable of paying billions of dollars for the acquisition.
As a result, industry experts believe Chairman Lee will need to find a buyer overseas if he wants to sell CJ CheilJedang’s bio business division.
#LeeJayhyun #CJGroup #CJCheilJedang #biobusiness #mergersandacquisitions #Kfood #globalexpansion #greenbio #redbio #businessstrategy
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- Samsung Galaxy S25 Targets '1.9 Billion Gamers': Roh Tae-moon Aims for MZ with High-Performance
- Roh Tae-moon, the president and head of Samsung Electronics’ Mobile eXperience (MX) business division, is strengthening cooperation with Qualcomm to significantly enhance gaming features in the upcoming Galaxy S25 series, expected to launch early next year.
Samsung plans to attract the world’s growing mobile gamer base, projected to reach 1.9 billion by 2027, by introducing a new feature called ‘Game Assistant’ to the Galaxy S25 series, which will enhance refresh rates and resolve overheating issues.
With Qualcomm’s latest mobile processor, the Snapdragon 8 Elite, the Galaxy S25 is expected to allow seamless gameplay of high-spec PC games on a smartphone.
According to smartphone industry sources on November 19, Roh is focusing on improving mobile gaming features to boost Galaxy S25 series sales.
The U.S. IT media outlet Android Police recently reported, citing a tipster, that Samsung’s upcoming Galaxy S25 series, running on the One UI 7 operating system, will feature the ‘Game Assistant.’
The tipster explained that this feature will allow games locked at a 60Hz refresh rate to run at 120Hz. Additionally, it will include a ‘Battery Performance Optimization’ function to prevent overheating during gaming, enabling longer playtimes on the same battery capacity.
These gaming-specific features are reportedly being developed in collaboration with Qualcomm. Android Police noted that Samsung’s Game Assistant will be supported by Qualcomm’s ‘Adreno Frame Motion Engine (AFME) 2.0.’
Qualcomm explained that AFME 2.0 ‘creates high-quality visuals with realistic details while doubling the frame rate without increasing power consumption.’
This technology is expected to resolve the 60Hz refresh rate limitation that has plagued most Android smartphone games. The refresh rate indicates how many image frames are displayed per second, with higher rates resulting in smoother visuals.
Given AFME 2.0’s emphasis on power efficiency, Samsung is also expected to address the longstanding overheating issues in its smartphones during gaming.
This feature will reportedly be exclusive to Samsung’s Galaxy smartphones. The IT media outlet Android Authority stated, ‘If AFME 2.0 technology is indeed applied, it is likely to remain an option exclusive to Snapdragon-powered Galaxy smartphones.’
Qualcomm’s Snapdragon 8 Elite, which is expected to be featured in the Galaxy S25 series, is also anticipated to enhance gaming capabilities.
The U.S. IT media outlet WCCF Tech recently reported, via a video from an insider, that the Snapdragon 8 Elite could run ‘Cyberpunk 2077,’ a high-spec PC and console game developed by Poland’s CD Projekt and released in 2020.
WCCF Tech noted, ‘Running Cyberpunk 2077 on a smartphone, even at a low graphics setting, is no easy task. The released video demonstrates that the processor can maintain a stable 60Hz refresh rate even when executing graphics-intensive games.’
Recent testing revealed that Qualcomm’s Snapdragon 8 Elite outperformed AMD’s Radeon 780M integrated laptop graphics card, which was released in 2023.
Roh’s focus on enhancing the gaming experience with the Galaxy S25 series is attributed to the rapid growth of the mobile gaming market and the younger generation’s shorter smartphone replacement cycle.
According to the market research firm Statista, the mobile gaming market exceeded $90 billion (approximately KRW 125 trillion) last year, surpassing the PC and console gaming markets. The market is expected to grow to $118 billion (approximately KRW 164 trillion) by 2027, with the number of global mobile gamers projected to reach 1.9 billion.
Marketing agency Zorka Agency reported that 29.5% of mobile gamers last year were aged 25 to 34, while 28.3% were aged 16 to 24, meaning nearly 60% of mobile gamers are under 34 years old.
Young consumers who enjoy mobile gaming also tend to replace their smartphones more frequently. According to a survey by U.S. financial firm S&P Global, 24.2% of Gen Z (those under 28) and 30% of Millennials (aged 28 to 44) reported replacing their smartphones within a year or less.
#GalaxyS25 #RohTaeMoon #SamsungElectronics #Qualcomm #Snapdragon8Elite #MobileGaming #GameAssistant #AFME2.0 #SmartphoneInnovation #MobileGameMarket
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- No New High-End Brand for GS E&C: Huh Yoon-hong's Commitment to 'Xi'
- Huh Yoon-hong, CEO of GS Engineering & Construction (GS E&C), has decided to retain the "Xi" brand as a high-end label despite the significant damage to its reputation caused by the collapse of an underground parking lot at an apartment complex in Incheon’s Geomdan district last year.
This decision reflects an emphasis on rebuilding trust in the long-standing Xi brand, which has represented GS E&C for over 20 years. It seems Huh prioritized the importance of restoring trust over immediately replacing the brand with a new one.
According to GS E&C on the 19th, the company decided to maintain and focus on the Xi brand as a single high-end offering, rather than launching another high-end brand, in order to preserve customer trust.
The company announced this direction at the "Xi Re-ignite" event held the previous day at the Xi Gallery in Gangnam-gu, Seoul.
At the event, Huh stated, "This rebranding of Xi is not just about changing the brand identity (BI) or logo design but about creating tangible changes rooted in customer orientation and trust."
The decision to maintain Xi as a high-end brand reflects its long-standing position as a premium brand in Korea’s apartment market, with high consumer preference. GS E&C also considered the potential devaluation of the Xi brand if a new brand were introduced.
Xi was first introduced in 2002, predating GS E&C itself, which was established in 2005. Over the past two decades, Xi has consistently ranked among the top apartment brands in reputation surveys.
In the "2024 Best Apartment Brand" survey conducted by Real Estate R114 and Korea Research, Xi ranked third, following Hyundai Engineering & Construction's Hillstate and Samsung C&T's Raemian.
Huh said, "We’ve approached the Xi rebranding not as a temporary event but as a process of building a new heritage of sustainable spaces."
To recover Xi's brand reputation, GS E&C is focusing on strengthening on-site management and enhancing user-centric services.
Huh stated, "Since taking office, I have strengthened on-site management and listened to the opinions of employees and partner companies. Going forward, Xi will aim to be a brand that grows through coexistence and collaboration, involving everyone from customers to partner companies, rather than merely competing for the top position in scale."
To enhance user-centric services, GS E&C plans to implement features such as high-quality breakfast services via mobile applications, book cafes curated by Kyobo Bookstore, and lighting designs that promote better sleep and eye health.
Leveraging Xi’s heritage, GS E&C has also strategized to target "apartment kids"—those who experienced apartment living during their childhood in the 2000s—as its main customer base.
Huh assumed the role of CEO of GS E&C in October, following the underground parking lot collapse at the Incheon Geomdan apartment complex in March of the previous year.
Since then, he has consistently emphasized "trust" in his efforts to address the aftermath of the Geomdan accident.
Huh highlighted trust in his New Year’s speech at the Maple Xi redevelopment site in Seocho-gu, Seoul, in January and again in July when unveiling GS E&C’s new vision.
The new vision, introduced in July, is "to achieve a safer and happier future life through transparent trust and relentless innovation."
During the recent Xi Re-ignite event, Huh reiterated the company’s commitment to creating new corporate value through rebranding while avoiding reckless bids and business expansion. He emphasized focusing on sustainable growth rather than merely pursuing quantitative growth.
"I believe there will be no difficult times for GS E&C as long as we continue to earn trust," he said. "We will strive with all employees to ensure that the hardships of the past do not return."
#HuhYoonhong #GSConstruction #XiBrand #GeomdanAccident #trustbuilding #brandreputation #apartmentmarket #highendbrand #usercentricservices #corporatevision
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- Heo Min-hoei, CJ's Future "Problem Solver," Brings Crisis-Management Expertise to the Group
- CJ Group Chairman Lee Jay-hyun has appointed Heo Min-heoi, known for his problem-solving abilities across various affiliates, as the new head of CJ’s Corporate Support Division, signaling a push for organizational restructuring.
Heo is known for his expertise in finance and strategy and has frequently been assigned to affiliates facing challenges or struggling to achieve results. Such assignments would not have been possible without the owner family's strong confidence in his abilities.
Moving forward, Heo will oversee external affairs for CJ, leveraging his extensive experience in managing various affiliates to shape the future of the CJ Group.
The executive appointments announced on the 18th indicate Lee Jay-hyun’s intent to strengthen the group's core operations through CJ, the group's control tower.
This round of appointments appears focused on driving change at CJ. Heo was chosen as the head of CJ, while the vacancy at CJ CGV’s CEO position was filled by a former overseas affiliate manager. The long-vacant Commerce Division head at CJ ENM was promoted internally. Apart from these changes, no significant shifts occurred in other affiliates.
The holding company plays a central role in aggregating all business and financial information from the affiliates. Appointing a new leader for the holding company suggests a strategic shift for the entire group.
Heo’s selection for this role is seen as particularly significant.
Heo Min-heoi is one of the most trusted executives among CJ Group's owner family.
He was appointed CEO of CJ Foodville in March 2012 but moved to CJ less than a year and a half later. At that time, CJ Group was facing a management vacuum following the arrest of Chairman Lee Jay-hyun.
In response, the group formed a five-member Group Management Committee at CJ to support the holding company, and Heo was brought in to assist.
The so-called "Five-Member Group Management Committee" included Chairman Sohn Kyung-shik, Vice Chairwoman Lee Mi-kyeong (Miky Lee), then-CJ Logistics Vice Chairman Lee Chae-wook, then-CJ President Lee Kwan-hoon, and then-CJ CheilJedang President Kim Cheol-ha. Heo was placed under President Lee Kwan-hoon in a comprehensive management role, effectively overseeing CJ Group’s internal operations.
Despite holding only a Vice President position at the time, Heo was given a critical role in the Group Management Committee, indicating the considerable trust he had earned from the owner family.
Heo also inherited board memberships for CJE&M (now CJ ENM), CJ O Shopping (now CJ OnStyle), and CJ CGV from Lee Jay-hyun when the chairman stepped down from these roles.
Heo has been a professional manager often deployed to affiliates facing significant challenges.
He was appointed head of CJ OliveNetworks at the end of 2014, shortly after the company was founded. As the first CEO, he had to stabilize the company, which was formed through a merger of two entities.
He also faced challenges at CJ O Shopping. When Heo took over, the company had fallen to 4th place in the home shopping industry based on sales, leading to instability, with two previous CEOs stepping down before completing their terms.
At CJ ENM, Heo led major decisions, such as the sale of shares in Studio Dragon and the spin-off of Tving, to secure new growth drivers. He was appointed CEO of CJ CGV at the end of 2020, during a period when the company faced an existential crisis due to COVID-19 and social distancing measures.
Despite the difficulties, Heo consistently met the expectations of the owner family, which is why he remained in key positions through several rounds of restructuring.
Heo’s return to CJ marks the first time in 10 years since he left the holding company for CJ OliveNetworks in December 2014.
With this appointment, Heo will now take charge of CJ’s Corporate Support Division, overseeing compliance and public relations, among other responsibilities.
Given Heo's extensive experience, it may seem surprising that he was assigned a role focused on external affairs rather than directly managing business operations.
However, placing an executive with significant business experience in an external affairs role could help CJ Group accelerate its strategic direction.
At CJ, the group's control tower, not only business acumen but also the ability to closely monitor external business environments is highly valued. This implies the need to maintain an external perspective and set the overall direction of the group rather than focusing solely on internal issues.
Given this context, Heo’s experience across the holding company, IT, home shopping, and entertainment affiliates is highly significant.
A CJ Group representative commented, "Heo Min-heoi is expected to play a key role in consolidating internal and external perspectives to set the future direction of CJ Group."
#LeeJayhyun #HeoMinheoi #CJGroup #CorporateRestructuring #AffiliateManagement #LeadershipChange #CJSupportDivision #GroupControlTower #StrategicDirection #BusinessRestructuring
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- Lee Jae-yong Boosts Samsung Electronics Stake: Accelerating Holding Company Structure?
- The decision by Samsung Electronics to buy back KRW 10 trillion (USD 7.2 billion) worth of its own shares for the first time in seven years is being interpreted not only as a shareholder return measure but also as a move by the Lee family to strengthen their control.
The Samsung owner family is expected to face a KRW 4 trillion (USD 2.88 billion) inheritance tax payment in the near future, which could result in a decrease in their shareholding in Samsung Electronics. By buying back and canceling treasury shares, the company can prevent this dilution.
Amid growing concerns about Samsung's management crisis, there is speculation that Chairman Lee Jae-yong may expedite restructuring efforts, transitioning Samsung C&T into a holding company structure to strengthen his control over the group.
According to industry sources as of November 18, recent management crises and declining stock prices at Samsung Electronics could accelerate Samsung Group's corporate restructuring.
On November 15, Samsung Electronics announced a plan to buy back KRW 10 trillion (USD 7.2 billion) worth of shares over the next year, with KRW 3 trillion (USD 2.16 billion) to be purchased within three months and subsequently canceled. This is the company’s third buyback, following KRW 11.3 trillion (USD 8.15 billion) in 2015 and KRW 9.3 trillion (USD 6.71 billion) in 2017.
The company stated that the decision to buy back shares was made to enhance shareholder value, as Samsung Electronics’ stock had recently fallen to KRW 49,900 (USD 36). Share buybacks, like dividends, are a key shareholder return policy that can have a greater impact when the stock price is low.
While the buyback is presented as a measure to enhance shareholder value, industry analysts believe it was also necessary for the Samsung owner family.
Former Leeum Museum Director Hong Ra-hee, Hotel Shilla President Lee Boo-jin, and Samsung C&T President Lee Seo-hyun had taken out stock-backed loans totaling about KRW 2.5 trillion (USD 1.8 billion) to pay inheritance taxes, using their Samsung Electronics shares as collateral. If the share price falls below a certain level, they must provide additional shares or cash as collateral.
Additionally, by canceling treasury shares, the owner family can indirectly increase their ownership stake in Samsung Electronics.
The current shareholding of the Samsung family in Samsung Electronics is 5.45%. However, as they proceed with paying the KRW 4 trillion (USD 2.88 billion) inheritance tax, they may have to sell some shares, potentially reducing their stake to the 4% range.
This would weaken the family's control over Samsung Electronics, leaving them vulnerable to challenges to their management rights.
However, if Samsung buys back and cancels KRW 10–20 trillion (USD 7.2–14.4 billion) worth of shares, the family could maintain their current ownership level even after accounting for share sales needed to cover the inheritance tax.
Ultimately, this buyback announcement can be seen as a preemptive move to maintain the ownership family’s control over Samsung Electronics.
An industry insider commented, “Chairman Lee Jae-yong and the owner family must pay billions of dollars in inheritance taxes, which will require selling some of their Samsung Electronics shares.”
There is also the possibility that the group’s restructuring could gain momentum alongside the buyback.
The financial sector has long speculated that Samsung C&T could acquire Samsung Electronics shares from Samsung Life Insurance and then transform into a holding company, restructuring the group’s governance.
The current cross-ownership structure of Samsung Group is as follows: “Chairman Lee Jae-yong → Samsung C&T → Samsung Life Insurance → Samsung Electronics → other affiliates.”
Samsung C&T owns a 19.3% stake in Samsung Life Insurance and a 5.0% stake in Samsung Electronics. Samsung Life Insurance (8.51%) and Samsung Fire & Marine Insurance (1.49%) together hold a 10% stake in Samsung Electronics.
However, under the Financial Industry Restructuring Act (FIRA), financial companies affiliated with large conglomerates are not allowed to own more than 10% of a non-financial company’s shares. If the buyback and cancellation of Samsung Electronics' treasury shares push Samsung Life Insurance and Samsung Fire’s holdings above 10%, they would have to sell the excess shares.
NH Investment & Securities Analyst Jung Joon-sub noted, “In 2018, Samsung Life Insurance and Samsung Fire & Marine Insurance sold excess shares resulting from Samsung Electronics' treasury share cancellation. The proceeds from the sales amounted to KRW 228.4 billion (USD 164.7 million) to KRW 761.2 billion (USD 549.1 million).”
Moreover, if the so-called "Samsung Life Insurance Law," an amendment to the Insurance Business Act, passes in the National Assembly, additional sales of Samsung Electronics shares by Samsung Life Insurance will become inevitable.
In 2021, then-Democratic Party lawmaker Park Yong-jin, along with his colleague Lee Yong-woo, proposed an amendment to the Insurance Business Act that would change the valuation method for insurers’ affiliated company shares from acquisition cost to market price, with a cap of 3% of total assets.
The proposal was discussed during the 21st National Assembly but was ultimately shelved. However, the Democratic Party is reportedly reconsidering the amendment for reintroduction.
If the amendment passes, it will require insurers to reduce their holdings, as it would limit ownership based on market price rather than acquisition cost. As a result, Samsung Life Insurance may need to sell about 6.7% of its 8.51% stake in Samsung Electronics.
This would disrupt the current structure of controlling Samsung Electronics through Samsung Life Insurance.
In response, Samsung Group has been considering a restructuring plan where Samsung C&T acquires Samsung Electronics shares from Samsung Life Insurance, establishing itself as a de facto holding company. The ownership structure would then follow a chain from Lee Jae-yong to Samsung C&T to Samsung Electronics and Samsung Life Insurance.
However, the Fair Trade Act requires holding companies to own at least 30% of their subsidiaries’ shares. For Samsung C&T to meet this requirement for Samsung Electronics, it would need at least KRW 50 trillion (USD 36 billion) in capital.
Therefore, there is speculation that Samsung C&T might leverage Samsung SDS to strengthen its control over Samsung Electronics.
One approach could involve a small-scale merger between Samsung Electronics and Samsung SDS, which would increase Lee Jae-yong and Samsung C&T’s stake in Samsung Electronics.
A small-scale merger is a simplified procedure under the Commercial Act that allows a merger without shareholder approval if the new shares issued account for less than 10% of the total shares of the acquiring company.
Samsung Electronics, Samsung C&T, and Chairman Lee Jae-yong currently hold stakes of 22.58%, 17.08%, and 9.2% in Samsung SDS, respectively.
DB Financial Investment Analyst Kim Soo-hyun commented, “Given the current market capitalization gap between Samsung Electronics and Samsung SDS—approximately 30 times—the small-scale merger is feasible. If a merger between Samsung SDS and Samsung Electronics occurs, it would increase Samsung C&T’s stake in Samsung Electronics, strengthening the owner family’s control.”
#SamsungElectronics #StockBuyback #InheritanceTax #CorporateRestructuring #LeeFamilyControl #SamsungC&T #SamsungLifeInsurance #FairTradeAct #SamsungSDS #SmallScaleMerger
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- Long-Term Plan for Normalizing KB Kookmin Bank’s Indonesian Unit; Lee Jae-keun Endures a Testing Period
- Lee Jae-keun, CEO of KB Kookmin Bank, is facing a challenging period as he seeks to improve the performance of the bank's overseas operations.
The losses of KB Kookmin Bank’s major overseas subsidiary in Indonesia have widened again this year. The CEO aims to turn a profit at the Indonesian subsidiary by as early as 2025 and is tightening measures to improve profitability.
According to KB Kookmin Bank's third-quarter report released on November 18, the Indonesian subsidiary, KB Bank (formerly KB Bukopin), recorded a net loss of KRW 278.6 billion (USD 200.9 million) in the third quarter of 2024.
This is nearly three times the loss recorded in the same period of 2023 (KRW 95.7 billion or USD 69.0 million). The net loss attributable to the parent company amounted to KRW 186.1 billion (USD 134.2 million) in the third quarter.
A representative of KB Kookmin Bank explained, "KB Bank incurred approximately KRW 100 billion (USD 72.1 million) in costs due to provisions and one-off tax expenses in the third quarter. However, excluding profits from non-performing loan sales, the loss before provision and pre-provision operating profit (PPOP) improved by about KRW 53.4 billion (USD 38.5 million), showing enhanced profitability."
Nevertheless, KB Bank has shown an increasing trend of losses for the entire year.
In the first quarter, KB Bank reported a net loss of KRW 52.9 billion (USD 38.2 million), followed by a net loss of KRW 95.8 billion (USD 69.1 million) in the second quarter, resulting in a total net loss of KRW 151.5 billion (USD 109.2 million) for the first half of the year. Despite posting a net profit of KRW 8.43 billion (USD 6.1 million) in the first half of 2023, the bank returned to losses within a year.
The accumulated net loss for the first three quarters of 2024 reached approximately KRW 430 billion (USD 310.0 million), almost five times the loss in the same period last year.
The mounting pressure on Lee to achieve a turnaround at the Indonesian subsidiary is inevitable.
In 2022, when Lee took office, KB Bank posted a net loss of KRW 802.1 billion (USD 578.3 million). In 2023, following capital injections and the sale of non-performing assets, the losses were reduced to KRW 261.3 billion (USD 188.5 million), but losses have since increased again.
Delays in the next-generation IT system project, a key initiative to enhance the competitiveness of the Indonesian subsidiary, have also added to the CEO’s burden.
In 2022, KB Bank received an upgraded comprehensive soundness rating from Indonesian financial regulators, and the bank began preparing to expand its business through new initiatives such as digital banking services.
KB Kookmin Bank initially planned to complete the development of KB Bank’s next-generation IT system by the end of this year and apply it to deposit and loan services. The bank invested around KRW 100 billion (USD 72.1 million) in this project, showing its commitment.
However, the project encountered difficulties, leading to a recent change in the main project manager.
Due to worsening profitability at KB Bank and delays in the IT system upgrade, Lee is also facing pressure from Korean financial regulators.
On October 29, Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), directed thorough inspections, including a potential investigation into KB Bank’s problematic acquisition, during an FSS executive meeting.
This directive followed the issue of KB Kookmin Bank's troubled Indonesian subsidiary being brought up during the National Assembly’s National Policy Committee audit.
During a recent trip to Indonesia, FSS Governor Lee Bok-hyun also visited the Indonesian Financial Services Authority (OJK), accompanied by Korean staff involved with KB Bank, underscoring the Korean regulator’s focus on risk management for overseas operations.
Since taking office in January 2022, Lee has been credited for his efforts to improve the profitability of the Indonesian business.
Under Lee’s leadership, KB Kookmin Bank supported KB Bank with a substantial capital injection and undertook restructuring measures, including the sale of non-performing assets.
During his first overseas trip as CEO in March 2022, Lee visited KB Bank in Indonesia as well as Cambodia, where he assessed the management status and discussed additional investment plans with local regulators.
In May 2023, Lee visited Indonesia again with FSS Governor Lee Bok-hyun and participated in a Memorandum of Understanding (MOU) signing with a local energy group, reinforcing efforts to expand the bank’s presence.
In 2024, KB Kookmin Bank announced plans to accelerate restructuring at KB Bank. In March of this year, the bank rebranded from KB Bukopin to KB Bank, updating its name, logo, and branding to align with the new IT system rollout.
As a result, some performance indicators, including interest income, have shown signs of improvement.
According to KB Kookmin Bank, KB Bank’s interest income in the third quarter of 2024 increased by 59.5% (approximately KRW 29.7 billion or USD 21.4 million) compared to the previous year. Non-interest income, excluding gains from non-performing loan sales, rose by 98.2% (around KRW 16.7 billion or USD 12.0 million). The normal loan ratio improved to 75.5%, up 18.8% from the second quarter.
If Lee is reappointed as CEO at the end of the year, he may successfully lead KB Bank’s turnaround to profitability as early as next year.
KB Kookmin Bank is aiming for KB Bank to return to profitability by 2025.
During the National Assembly’s policy audit in October, KB Kookmin Bank Vice President Kang Nam-chae stated, “We are working very hard on improving KB Bank’s management, and while we initially targeted profitability by 2026, we are now aiming for a faster turnaround as early as next year.”
A representative of KB Kookmin Bank added, “We were aware that KB Bank was a troubled institution at the time of acquisition and formulated a long-term management plan. We continue to sell off non-performing loans and recover distressed assets. We are targeting profitability for KB Bank by 2025 and expect it to start contributing to the group’s return on equity (ROE) from 2026 onward.”
#LeeJaekeun #KBKookminBank #KBIndonesia #OverseasExpansion #ProfitabilityChallenges #NonPerformingLoans #FinancialSupervisoryService #ITSystemDelays #TurnaroundStrategy #NationalAssembly
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- Lee Jae-myung Sentenced to 1 Year in Prison with 2-Year Probation for Election Law Violation in First Trial
- Lee Jae-myung, leader of the Democratic Party of Korea, was handed a suspended sentence in the first trial of his public election law violation case.
On November 15, the Seoul Central District Court’s 34th Criminal Division sentenced Lee to one year in prison, suspended for two years, in the case involving violations of the Public Official Election Act.
If the suspended sentence of one year is upheld by the Supreme Court, it would result in the annulment of his election as an elected official. According to the Public Official Election Act, any conviction with a fine of KRW 1 million or higher leads to the loss of office.
In September 2022, Lee was indicted for spreading false information related to two cases: the alleged preferential land use changes for the Baekhyeon-dong site involving the Korea Food Research Institute, and his claim of not knowing Kim Moon-ki, a senior official at Seongnam Development Corporation, during his 2021 presidential campaign.
Lee had stated in televised debates and interviews that he did not know Kim, and during a parliamentary hearing, he claimed that the land use changes were made under pressure from the Ministry of Land, Infrastructure, and Transport. Prosecutors argued that these statements were false and intended to sway the election outcome, leading to the indictment.
Among the two charges, Lee was acquitted of the statement regarding his acquaintance with Kim Moon-ki but was found guilty of the false claim about external pressure in the Baekhyeon-dong case.
The court emphasized that the false statements made by Lee during the presidential campaign were particularly severe given the widespread public interest in the allegations against him.
The judge stated, “The accusations against the defendant were a matter of national interest, and using broadcast media amplified the impact and spread of the false information. Publicly spreading false information during an election can distort and undermine the voters’ will.”
The court added, “While freedom of expression must be protected during elections, we must also consider the potential distortion of public opinion caused by false information. The gravity of the crime is significant.”
Lee expressed his intent to appeal immediately, stating that he could not accept the court’s ruling.
Lee commented, “The court’s decision is based on a factual recognition that I find hard to accept. There are still two more legal stages remaining, and the judgment of the people and history will last forever.”
He added, “Today’s scene will be remembered as a moment in the modern history of South Korea.”
#LeeJaeMyung #ElectionLawViolation #SuspendedSentence #DemocraticParty #SouthKoreaPolitics #SupremeCourt #ParliamentarySeatLoss #FirstTrialVerdict #PublicOfficialElectionAct #PoliticalScandal
