Wednesday, November 30, 2016

Restructuring Talks to SPLIT SAMSUNG into TWO FIRMS

When we last left South Korean electronics manufacturer Samsung, it was being hammered with controversy over the disastrous short life of its flawed Galaxy Note 7 tablet-phone, from its negatively hot debut, to a clunky product recall, to the final death knoll after its replacement units proved just as faulty as the first ones. The evidence of involvement in the shady business dealings between President Park Geun-hye and Choi Soon-sil was like the cherry on top for their unlucky year. With shareholder values dropping like rocks, Samsung is now entering discussions as regards to how the company might best cope with their predicament.

According to BBC, the pan involves dividing the larger Samsung Company into two halves, one the actual operating firm and the other a holding unit. The presence of more than one company answering to Samsung was calculated as a means to increase its overall value to the shareholders, even as the tech giant has begun to buy back its shares of stock while increasing dividends for the rest. It was the best option left to them after the aforementioned Samsung Galaxy Note 7 debacle that ended with cessation of its production last October.

In light with its planned restructuring, Samsung plans to undergo a complete review of their proposed new corporate structure post-division, to be performed by a board of external advisors, although they have made assurances that the review itself will not mention any intent of the corporate management going forward, nor that of the advisory board itself. The splitting into a holding company for ownership and an operating firm was suggested by Elliott Management, an American-based US activist hedge fund.

In arguing for the splitting of the company, EM pointed out that the restructure will ease and simplify the effort to get a precise value of Samsung’s assets, doubly convenient in light with current investigations being carried out on it. The original state of the firm has Samsung Electronics, which makes the appliances and gadgets including the Galaxy phones, being tied through complicated cross shareholding, with other wider Samsung-named ventures in South Korea such as heavy industry, shipping and insurance, making a conventional asset valuation somewhat difficult.

As a result of the planned split, the operating company, which includes the electronics manufacturing branch, can easily be evaluated for its worth, while the holding firm maintains the necessary cross-shareholding within itself and the other affiliates. Samsung’s investors have been supportive of this proposal, most especially as it would return more company control back to the industry giant’s founding family, the Lees.

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