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Samsung Under Mounting Pressure to Do Splits – Report

Iain Morris
11/28/2016

South Korean electronics giant Samsung is said to be considering whether to split its business in two and take other steps to improve corporate governance under pressure from the investment community.

Activist investor Elliott Management Corp is urging Samsung Electronics Co. Ltd. (Korea: SEC) to split into a holding company and an operating company, according to a Bloomberg report. It also wants the organization to appoint three independent board members, list shares on a US exchange and pay shareholders a special dividend of about $26 billion.

The South Korean firm is reported to be holding talks with other investors in the US and South Korea to gauge opinion on Elliott's proposals.

Samsung has come under pressure since being forced to withdraw its high-end Note 7 smartphones from the market a few weeks ago, following reports that a number of them had caught fire during use.

The crisis is set to cost Samsung about $6 billion and has come as a huge blow to the reputation and brand image of the company, which competes against iPhone maker Apple Inc. (Nasdaq: AAPL) in the market for expensive smartphones. (See Samsung's Note 7 Nightmare to Hit Profits Into 2017.)


For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.


According to Bloomberg, Elliott's proposals have already won support from another investment firm called Artisan Partners.

"We agree with Elliott's proposals," said Daniel O'Keefe, Artisan's managing director, as quoted in Bloomberg's story. "We think Samsung in its current structure faces certain existential threats."

O'Keefe reportedly goes on to say that Samsung's current set-up is poorly suited to the fast-changing technology industry and that its board lacks independent members with global experience.

Bloomberg reports that another fund called Aberdeen Asset Management has also backed Elliott's proposals.

Samsung is due to respond to Elliott's proposals by the end of the month.

Elliot Management has a history of intervention in the communications networking sector, most notably in recent years at Juniper Networks. (See Juniper Bows to Investor Pressure, Refocuses, Dell Kicking EMC's Tires and Thoma, Teachers Fund Win Riverbed's Hand.)

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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kq4ym
kq4ym
12/12/2016 | 4:51:23 PM
Re: There is no possibility of Samsung Electronics split
That seems to be a good argument for it not happening. But, I wonder if public concern and possibly governmental pressure might indeed force a realighnment of the company for better governance.
Michelle
Michelle
11/29/2016 | 2:27:24 PM
Re: Rimshot
they did say "We think Samsung in its current structure faces certain existential threats"

notes and all, I guess
Joe Stanganelli
Joe Stanganelli
11/28/2016 | 8:09:06 PM
Rimshot
I guess, unlike with their Note 7s, their not yet ready to burn those bridges.

...

I'll show myself out.
TV Monitor
TV Monitor
11/28/2016 | 11:14:54 AM
There is no possibility of Samsung Electronics split
Vice Chairman Lee(De Facto Chairman because Chairman had a stroke) will not split Samsung Electronics and weaken his grip over the entire Samsung Group because he burned many candles to get where he is today, the total control of the group in which the Samsung Electronics is just a portion of. The way Samsung group's ownershp is structured that Lee cannot lose the control of Samsung Electronics without losing the control of some 60 other other Samsung firms because of cross ownership. Hence the split is a non-starter from Lee's perspective.

What Elliot says is simply ignored over there, nor does Elliot has the shares to challenge Lee's control because Lee family controlls about 40%.
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