Samsung, Hanwha enter uncharted territory
Perhaps the sale of four Samsung subsidiaries to Hanwha came as a surprise, although it should not have. This is a free market economy and such transactions are supposed to happen all the time.
What made this deal interesting is that it occurred privately without any intervention from the government or business organizations. The companies basically decided what was best for business on their own.
What is also meaningful is that the decision was basically made by Lee Jae-yong, vice chairman of Samsung Electronics who is presumed to take over the leadership of Samsung Group as his father, Lee Kun-hee, remains in hospital.
Actually, the theory of the transaction ― worth 1.9 trillion won ― is simple; both conglomerates get to select and concentrate on their greater strengths.
For Samsung, it is an opportunity to focus more on electronics ― even as its profits have been falling in recent quarters ― to maintain its top global position.
As part of the latest strategy, Samsung Electronics will be buying back 2.2 trillion won worth of its stock while surfing the market for new acquisitions in the field.
On the part of Hanwha, it decided to take on the financial burden as it tries to align its position as a leader in chemicals and the defense industry under the determination of Chairman Kim Seung-yeon who had been in and out of court and jail.
While the transaction is costing Hanwha a considerable amount of money, the total assets of the four Samsung companies ― Samsung Petrochemicals, Samsung Techwin, Samsung C&T and Samsung Thales ― is estimated at 11 trillion won, pushing Hanwha up the corporate rankings.
This comes as encouraging news in the Korean business community because companies are moving more independently, looking out for their own interests.
In the late 1990s when the Asian foreign exchange crisis hit, firms were forced to undergo restructuring under the pressure of government.
The Kim Dae-jung administration forced LG Group to transfer its semiconductor business to Hyundai Group. To this day, LG Chairman Koo Bon-moo refuses to attend monthly meetings of the Federation of Korean Industries because of what happened 15 years ago.
There have been numerous other cases in which companies suffered due to government policies such as the business expansion of POSCO and KT. The two companies ended up posting losses from new business acquisitions and now they are just trying to turn back the clock.
So it is refreshing that Samsung's Lee Jae-yong declared that what has to be discarded should be thrown away without regrets.
There is no telling how the latest transaction ― the largest since the Asian financial crisis ― will work out for both Samsung and Hanwha.
Trimming down a business is never an easy decision for huge conglomerates such as Samsung and Hanwha, but it does have to come up with 1.9 trillion won.
Nevertheless, the deal is certain to ring certain bells for other Korean companies from the perspective that with high risks, high returns may follow.
Perhaps the sale of four Samsung subsidiaries to Hanwha came as a surprise, although it should not have. This is a free market economy and such transactions are supposed to happen all the time.
What made this deal interesting is that it occurred privately without any intervention from the government or business organizations. The companies basically decided what was best for business on their own.
What is also meaningful is that the decision was basically made by Lee Jae-yong, vice chairman of Samsung Electronics who is presumed to take over the leadership of Samsung Group as his father, Lee Kun-hee, remains in hospital.
Actually, the theory of the transaction ― worth 1.9 trillion won ― is simple; both conglomerates get to select and concentrate on their greater strengths.
For Samsung, it is an opportunity to focus more on electronics ― even as its profits have been falling in recent quarters ― to maintain its top global position.
As part of the latest strategy, Samsung Electronics will be buying back 2.2 trillion won worth of its stock while surfing the market for new acquisitions in the field.
On the part of Hanwha, it decided to take on the financial burden as it tries to align its position as a leader in chemicals and the defense industry under the determination of Chairman Kim Seung-yeon who had been in and out of court and jail.
While the transaction is costing Hanwha a considerable amount of money, the total assets of the four Samsung companies ― Samsung Petrochemicals, Samsung Techwin, Samsung C&T and Samsung Thales ― is estimated at 11 trillion won, pushing Hanwha up the corporate rankings.
This comes as encouraging news in the Korean business community because companies are moving more independently, looking out for their own interests.
In the late 1990s when the Asian foreign exchange crisis hit, firms were forced to undergo restructuring under the pressure of government.
The Kim Dae-jung administration forced LG Group to transfer its semiconductor business to Hyundai Group. To this day, LG Chairman Koo Bon-moo refuses to attend monthly meetings of the Federation of Korean Industries because of what happened 15 years ago.
There have been numerous other cases in which companies suffered due to government policies such as the business expansion of POSCO and KT. The two companies ended up posting losses from new business acquisitions and now they are just trying to turn back the clock.
So it is refreshing that Samsung's Lee Jae-yong declared that what has to be discarded should be thrown away without regrets.
There is no telling how the latest transaction ― the largest since the Asian financial crisis ― will work out for both Samsung and Hanwha.
Trimming down a business is never an easy decision for huge conglomerates such as Samsung and Hanwha, but it does have to come up with 1.9 trillion won.
Nevertheless, the deal is certain to ring certain bells for other Korean companies from the perspective that with high risks, high returns may follow.
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