South Korean tech behemoth, Samsung is currently undergoing a restructuring to further strengthen its growing business propositions and cut loose those not working in its favor. The company has received a proposal from U.S. activist hedge fund Elliott Management to consider a split of its business into two, reports Reuters citing Seoul Economic Daily.
The said proposal for the split was proposed by Elliot back in October. The hedge fund is of the opinion that a split will enable the heirs of the founding Lee family – who’ve joined the higher ranks just recently – to strengthen their grip on the most-valued ‘smartphone’ division of the company. This might be the bitter truth but Samsung’s smartphone business has been struck with a major setback due to the whole Galaxy Note 7 exploding debacle.
Sources cited by Seoul Economic Daily also suggest that Samsung’s board of directors are expected to meet on Tuesday to further discuss the restructuring proposal put forth by Elliot. The hedge fund has recommended the Korean hardware behemoth to divide into a holding vehicle for ownership purposes and an operating company.
If this restructuring process is successful then the deal would also involve paying a $26 billion special dividend, pledging to return at least 75 percent of free cash flow to investors. Also, Samsung would have to agree to appoint some independent directors and high-level officials for the two business entities it will split into.
Commenting on the reports, HI Investments airs its views in a report, saying,
Even if Samsung Electronics does not comment on specifics such as the timing of a split … the firm will at least say it will implement ownership structure changes in a reasonablemanner.
The reorganization efforts of the company have been accelerated since the appointment of Samsung Chairman Lee Kun-hee’s son Jay Y. Lee as the heir of the conglomerate. The decision to hand over the reins of the company over to him after his father was decided when Kun-hee was incapacitated following a May 2014 heart attack.
Samsung has recently been working on streamlining its business and getting rid of the assets which are either showing signs of slow growth or lower-than-expected sales. It has already sold off its printer division to Hewlett-Packard for $1.05 billion and is now looking to hand over its struggling PC business to the leader in the said industry — Lenovo. Thus, the largest South Korean conglomerate is looking to establish a stable transfer of power to the next members of the founding family.
We’ve contacted Samsung and will update you once we receive word from them.