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.)
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, , News Editor, Light Reading