Date
4 December 2016
Facing pressure to boost shareholder returns, Samsung is reviewing its corporate structure and also taking some other steps. Photo: Bloomberg
Facing pressure to boost shareholder returns, Samsung is reviewing its corporate structure and also taking some other steps. Photo: Bloomberg

Samsung to review corporate structure, boost dividends

Samsung Electronics, which is under pressure from shareholders to improve investor returns, said on Tuesday that it will consider creating a holding company in a review of its corporate structure.

The South Korean technology giant said in a statement that it has hired external advisers for a review that is expected to take at least six months, Reuters reports.

The move, along with a plan to raise dividends, come after US hedge fund Elliott Management in October called for Samsung to split itself into a holding vehicle and an operating company.

Samsung said it is “absolutely neutral” about the restructuring, adding that the “review does not indicate the management or the board’s intention one way or another.” 

The statement keeps the door open for Elliott to continue its pressure on the company, which includes the hedge fund’s ability to nominate board directors at the next annual meeting, Reuters noted.

Elliott, through its holding company affiliates, called Samsung’s plan a “constructive initial step.” But the US$27 billion hedge fund also signaled it wanted more.

“We anticipate more meaningful changes following the company’s corporate structure review,” the Elliott affiliates said in a statement on Tuesday.

Samsung did not directly mention Elliott in its statement, but the Korean firm promised to respond to the fund’s ideas by the end of November.

Elliott, which launched its Samsung campaign last month, owns 0.62 percent of Samsung’s stock.

Samsung pledged to return 50 percent of free cash flow to shareholders for 2016 and 2017, falling short of Elliott’s call for 75 percent to be returned and to pay a US$26 billion special dividend.

Samsung rejected another Elliott proposal by saying that even if it adopts a holding company, it has no plans at present to merge that with Samsung C&T Corp., the group’s current de facto holding company and a firm that Elliott has previously targeted.

Investors and analysts have long complained that Samsung shares trade at steep discounts to global peers due to what they say is a complex ownership structure, poor corporate governance and inefficient cash management.

The hope is that a major restructuring will address those concerns and boost the company’s value.

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RC

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