Samsung heir backs share sale in engineering unit

By Kim Yoo-chul

Samsung’s continuing moves to transfer power to the third generation of its founding family led by Vice Chairman Lee Jae-yong are expected to be accelerated because of his expected purchase of shares in the group’s engineering affiliate.

Samsung said Lee will use proceeds from his unloading of Samsung SDS stock to buy shares in Samsung Engineering if the latter’s rights issuance is not fully subscribed to.

The vice chairman sold 2.05 percent of his shares in Samsung SDS and secured about 300 billion won.

“Expectations that the money that will be earned from the selling of Samsung SDS stakes may be used as inheritance tax have gone too far,” said an official, wishing not to be identified. “Samsung wants investors to have confidence in Samsung Engineering shares.”

He said the successful issuance of Samsung Engineering’s shares is vitally important because the group hopes to improve financing in the unit with support from investors before taking “next measures.”

Samsung SDI and New Samsung C&T, a de facto holding company of the conglomerate, confirmed their plans to invest billions of dollars in Samsung Engineering’s rights issue, according to the companies.

“Samsung Engineering can’t survive by itself, given the tough market situation,” the official said. “Samsung affiliates are ready to step in to revive the engineering unit, which may be acquired by Samsung C&T, helping vice chairman Lee expand his influence on the conglomerate.”

Last year, Samsung Engineering announced a new shares issuance to improve its financial soundness after its debt exceeded assets.

Lee’s decision to unload his stake in one of the group’s key affiliates is regarded as a “rare thing” because Samsung has so far been letting its units handle their businesses on their own.

“Working-level discussions are under way to prepare room for Lee to purchase more new Samsung Engineering shares as retail and institutional investors have shown keen interest to participate in the rights issue,” said another official.

Citing the popularity of Samsung Engineering’s rights issue, some expect Lee to use the money to buy more Samsung C&T shares.

“The Fair Trade Commission is asking Samsung to address issues relating to the group’s web cross-holding systems by March 1,” said an official at a local fund manager. “Therefore, Samsung SDI needs to sell its 2.6 percent holding in Samsung C&T. As Samsung C&T’s role is as a holding firm, the vice chairman may buy more shares in Samsung C&T.”

He said his clients were being advised to buy more Samsung C&T shares, in line with Samsung’s plan to boost shareholder value.