Samsung Electronics Co. turned down activist investor Paul Elliott Singer’s push for a corporate restructuring, offering instead to reward shareholders by paying its first-ever quarterly dividend and canceling tens of billions of dollars in treasury shares amid a surge in profits, Bloomberg reports.
The Suwon, South Korea-based firm said Thursday that transforming into a holding company, as Singer advocated, would not help Samsung’s competitiveness and could face regulatory hurdles.
The company also reported first quarter net income of 7.49 trillion won (US$6.7 billion), the highest level in almost four years and far ahead of the 6.77 trillion won expected by analysts. Shares climbed to a record high.
The strong financial performance comes despite other challenges. Vice chairman and de facto chief Jay Y. Lee is on trial in an influence-peddling scandal and remains in detention.
“We are encouraged that Samsung Electronics has agreed to take the bold step of optimizing its balance sheet through a cancellation of its legacy holding of treasury shares,” Elliott Management Corp. said in an emailed statement. “We think there is room for even more progress due to the company’s announced commitment to enhance its board.”
Elliott called on Samsung to restructure in October, releasing a 10-page letter that detailed his push for a holding company, more independent directors, a Nasdaq listing and the payment of 30 trillion won of dividends.
While Samsung has returned more cash to investors, it cited an increasingly uncertain “legal and regulatory environment” for its decision against a holding company. Calls to reduce the power of families behind South Korea’s conglomerates are growing ahead of the May 9 presidential election and parliament has been reviewing proposals that could make it harder for Lee to control the crown jewel of the nation’s biggest company.
Turning into a holding company would have taken up to a year and those pending proposals may been approved more quickly if Samsung moved in that direction, Robert Yi, head of investor relations, told analysts in a conference call. Lee expressed no particular view when he was informed of the decision not to split into a holding company, he said.
Lee, grandson of the Samsung founder, is fighting charges that he paid bribes to a confidante of the country’s former President Park Geun-hye to win government support of a merger of affiliates that tightened his grip. Both Lee and Park have denied the allegations.
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