November 22, 2024

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[THE INVESTOR] Tech giant Samsung Electronics said on April 27 that it has decided not to set up a holding company, turning down requests made by some of its global investors, such as Elliott Management, to improve the intricate corporate structure of Samsung Group and enhance shareholder value.

“After conducting a comprehensive review with external advisors, the company’s board of directors has decided not to convert to a holding company structure,” the tech giant said in a statement.

“A holding company structure would not strengthen the competitiveness of the company’s businesses and could potentially weigh on the company’s operations in the long term.”

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The company explained that the establishment of a holding company requires divestment of equity stakes held by itself and its affiliates -- a process that needs the approval of shareholders and BOD of the related companies.

The financial business arms of Samsung Group will also have to divest part or all of its stake in the tech firm according to the Korean financial laws and that could pose a great risk to the stock price of the tech firm, the company said.

In November, Samsung Group announced that it would review ways to streamline its complex governing structure, which included the foundation of a holding company of the electronics firm.

After the imprisonment of Samsung Vice Chairman Lee Jae-yong and disbandment of the conglomerate’s control tower, both in February, the drive to set up a holding firm lost momentum.

The latest decision to maintain the status quo came as the stock price has been rising in recent months thanks to the robust chip and display businesses.

“Samsung seems to have found no reason to make an abrupt change in its management structure as its three business pillars of home appliances, electronic parts and mobile devices are excelling in the current system,” said an industry source who wished to be unnamed.

The tech behemoth posted 9.9 trillion won (US$8.76 billion) operating profit in the first quarter, up from 6.68 trillion won last year. Its revenue came in at 50.55 trillion won, up from 49.78 trillion won. The robust sales of memory chips and OLED displays have driven profits in the period.

By Kim Young-won (wone0102@heraldcorp.com)