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Samsung Sells Units and Announces $2 Billion Share Buyback

Nov. 26, 2014
The world's top maker of mobile phones and TVs has been under growing pressure to boost returns for shareholders including increasing dividends.

Samsung (IW 1000 /12) announced Wednesday the $1.7 billion sale of stakes in four affiliates and a $2.0 billion share buyback as the South Korean giant steps up restructuring efforts ahead of a generational ownership succession. 

The sale of its petrochemical and defense units to the Hanwha conglomerate, which has major petrochemical holdings, is expected to be finalized in the first half of next year, Samsung Group said.

The deal involves Samsung Electronics and other group affiliates selling their combined stakes in defense firm Samsung Techwin and Samsung General Chemicals.

A 50% stake held by Samsung General Chemicals in its joint venture with the French energy giant Total, called Samsung Total, will also be sold to Hanwha, along with Samsung Techwin's 50-percent holding in a joint venture with French defense firm Thales.

It marks the first sale of Samsung affiliates since the group was forced to shed its struggling carmaking unit in 1997 during the Asian financial crisis.

The group, comprised of dozens of units including the flagship Samsung Electronics, earns a collective revenue equal to around 20% of South Korea's annual economic output. 

Separately Wednesday, Samsung Electronics announced a share buyback plan valued at 2.2 trillion won (US$2 billion) -- a move to appease shareholders frustrated with a slumping share price.

The buyback from Thursday to February involves 1.96 trillion won worth of common shares and 229.5 billion worth of preferred shares, the firm said in a regulatory filing.

Streamlining Drive 

The announcement came after trading closed on the Seoul stock market. 

The world's top maker of mobile phones and TVs has been under growing pressure to boost returns for shareholders including increasing dividends.

Its share price tumbled more than 10% this year as growth in the key smartphone business began to lose steam, sapping profits.  

Samsung Electronics last month reported its smallest quarterly profit in nearly three years.

The family-run Samsung Group, currently chaired by Lee Kun-Hee, has merged, broken out or newly listed some of its key units in recent years as he prepares to hand over helm to his son, J.Y. Lee.

The founding Lee family has been under growing state pressure to unravel its complex cross shareholdings and make its governing structure more transparent.

The sell-off of the units indicates a desire to streamline the behemoth so as to concentrate on its key profit-making units, said Kim Ji-San, analyst at Seoul-based Kium Securities said.

"The deal shows Samsung is determined to shed non-core units deemed not competitive enough globally and to focus on key businesses like electronics, finances, construction and engineering," Kim said. 

Samsung Techwin, a developer of security equipment and aerospace technologies, reported a net profit of 133 billion won last year, but has amassed a net loss of 14.5 billion for the first three quarter of this year. 

Samsung's restructuring has not always been smooth sailing.

Last week it had to scrap a merger between two major units -- Samsung Heavy Industries and Samsung Engineering -- due to the spiraling cost of buying back stock from shareholders opposed to the deal.

Copyright Agence France-Presse, 2014

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