Samsung Electro-Mechanics Co. and Samsung Fire & Marine Insurance Co., affiliates under South Korea’s biggest conglomerate Samsung Group, will offload their entire stakes in the group’s de-facto holding company Samsung C&T Corp. worth nearly 1 trillion won ($895 million) in total to complete rationalizing the typical three-tier pyramidal structure under a holding entity.
The two companies each in a separate regulatory filing on Friday said they will sell their stakes in their parent Samsung C&T through an after-trading-hour block trade. Samsung Electro-Mechanics will dispose of its entire 5 million Samsung C&T shares worth 642.5 billion won based on Thursday’s closing price of 128,500 won apiece. Samsung Fire & Marine Insurance will sell all 2,617,297 Samsung C&T shares worth 328.5 billion won.
There have been rumors that Samsung C&T would sell its real estate asset and stakes in its old petrochemical affiliate to take over its stakes from Electro-Mechanics and Fire & Marine Insurance. But after the two sibling companies have decided to unload Samsung C&T stakes in the market, the conglomerate would be able to completely sever the web of the complex cross-shareholdings among affiliates.
Samsung Fire & Marine Insurance said in a filing that it is selling the entire stakes in Samsung C&T to improve its asset management while Samsung Electro-Mechanics to secure funds for investments and improve its balance sheet.
The latest decision by the two Samsung affiliates follows the similar move by its sister company Samsung SDI Co. that sold all of its 4.04 million shares, worth 559.9 billion won, in Samsung C&T in April. The battery-making unit under Samsung Group said at that time that the stake sale aimed to rationalize cross-affiliate stakeholdings and raise funds for investments.
The sale of the stakes in Samsung C&T by its three affiliates has come under the government’s tougher regulatory guideline for the country’s conglomerates to prevent new cross-affiliate shareholding through reorganization.
Cross-shareholding management structure allows affiliated companies of big business groups in Korea to hold shares in each other based on a circular structure, allowing the group owner to have control over entire affiliates with a little stake. The antitrust watchdog had also viewed the 2015 merger of Samsung C&T and Cheil Industries as a “strengthening” of the group companies’ cross-shareholding structure.
Once Samsung Electro-Mechanics and Samsung Fire & Marine Insurance rid their stakes in Samsung C&T, the country’s largest family-owned chaebol group will be able to speed up simplifying its complex cross-sharing connection, following the Moon Jae-in administration’s lead to reform the abnormal business practices of chaebol families.
In Seoul trading on Friday, Samsung C&T shares gained 1.95 percent to end at 131,000 won and Samsung Fire & Marine Insurance shares rose 2.71 percent to 265,000 won. Those of Samsung Electro-Mechanics fell 0.68 percent and finished the day at 145,000 won.
By Han Woo-ram and Cho Jeehyun
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