Perspectives from ISB

Samsung, the South Korean chaebol, founded in 1938, and owned by the Lee family, is under pressure from the New York based hedge fund Elliott Management. Elliott owns 0.62% of Samsung Electronics. The firm wants Samsung to simplify its complicated ownership structure. It argues that doing so would eliminate the discount investors currently place on Samsung’s shares. Elliott has also called for three new independent directors on Samsung’s board.

 This is not the first time Elliot has questioned the governance practices at Samsung. Even last year, Elliott unsuccessfully tried to prevent the merger of Samsung C&T Corp with another Samsung affiliate, Cheil Industries Inc. That deal was considered a main piece of the controlling Lee family’s succession plan. The ailing, 74-year-old Lee Kun-hee, who runs the group, is in the process of handing over the reins to his three children. Lee’s son, Jay Y. Lee, 48, is seen as the heir apparent, and his profile at the company has risen during the past few years.

 Analysts are doubtful about the impact Elliot, might have on the top management of Samsung. Partially because of the small stake Elliot has in the company and also because of scale and size of the company. However it will be interesting to observe how the new management at Samsung responds to these questions. Meanwhile Samsung Electronics shares rose to a record high the day after Elliott submitted his unsolicited proposals for a corporate restructuring.

Source: Reuters, Oct. 5, 2016 and Oct. 6, 2016

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