 Just when it is geared up for another takeoff through major reshuffles and organizational shakeup, Samsung Group is facing another PR blowup from its owner’s son who is fighting a divorce suit filed by his estranged wife. / Korea Times |
Father-to-Son Succession Plan Coming Under More Pressure
By Kim Tong-hyung
Staff Reporter
It's a divorce of Samsung proportions.
At least 500 billion won or about $352 million is at stake. If this figure is not impressive enough, what about the effect a legal battle is likely to have on the succession order at Korea's biggest business empire.
Last week, Lim Se-ryeong's legal action to divorce from Jae-yong, her husband of 11 years and Samsung's heir apparent, was one of the biggest new items.
The size of alimony Lim was seeking is the largest ever sought in a Korean family court. She also wants custody of the couple's two children, who stand in line to receive the Samsung wealth. Jae-yong is the only son of Lee Kun-hee, the former chairman who still controls the conglomerate.
Lim, the older of the two daughters of Daesang Group honorary chairman Lim Chang-wook, is also the second-largest shareholder of the conglomerate behind her sister.
A cross-holding scheme allows Jae-yong and the older Lee to combine for a controlling stake in Samsung's spiraling corporate empire.
According to financial records, Jae-yong's personal wealth is valued at above one trillion won when counting his listed and unlisted shares in Samsung units and other companies, excluding bank deposits and real estate that he owns.
Jae-yong, a vice president of Samsung Electronics, owns about 0.57 percent of the country's biggest electronics maker, which is currently worth around 430 billion won.
In unlisted shares, Jae-yong also owns about 25.1 percent of Samsung Everland, an amusement park operator and de facto holding company of the conglomerate; 9.1 percent of Samsung SDS; 7.7 percent of Samsung Investment Trust Management; 7.6 percent of Samsung Networks; 46 percent of Scomm Tech; and stakes in other companies.
It remains to be seen how much Lim will get, however their divorce suit is settled. According to Korean law, a divorce warrants only the splitting of wealth that is accumulated after the marriage.
Considering that Jae-yong had acquired most of his shares in Samsung Electronics and Samsung Everland before his marriage with Lim, it looks likely that his estranged wife will have to settle for much less than the 500 billion won she is seeking.
The shares in Samsung SDS, Samsung Networks and other companies Jae-yong acquired after marriage are thought to be just worth around 120 billion won.
Most industry watchers believe that Jae-yong's divorce may not have a meaningful effect on his grip of the conglomerate, especially as his Samsung Everland shares, the core of the cross-holding structure, are likely to remain untouchable.
``The divorce suit will not have much of an effect on Samsung's succession plans or its transition into a holding company structure,'' said Kang Seong-boo, an analyst from Tong Yang Securities.
However, Samsung officials can't afford to be casual about Jae-yong's latest trouble.
Courts are no stranger to ``odd rulings,'' having sometimes in the past favored the ``victims.''
Besides, if Lim provided the court with ``compelling'' evidence that justifies her demand for a legal separation, it would work to her advantage.
On top of embarrassing personal affairs, the court proceedings may, as in other messy divorce cases, bring out corporate dirty laundry.
Samsung officials can ill-afford further bad publicity when the older Lee is still involved in a lengthy court battle over tax evasion.
Industry watchers wonder whether Jae-yong's divorce suit will give Samsung's critics another chance to ask the corporation to improve its governance and attempt to derail the sneaky scheme for a father-to-son wealth transfer.
Last year, the senior Lee was convicted of tax evasion following a special prosecutor's probe triggered by revelations by a former legal council, and received a suspended three-year jail sentence. Lee also resigned as group chairman.
thkim@koreatimes.co.kr
