Conglomerate plans W2 tril. own share buyback
By Kim Yoo-chul
Samsung Electronics announced late Wednesday that the firm will buy back 2.19 trillion won ($2 billion) worth of its own shares in a bid to stabilize its shares and improve shareholder value.
This is the first time in seven years that the tech giant has utilized a buyback plan. In January 2007, it bought 1.8 trillion won worth of its own shares.
"The decision was aimed at boosting value for our shareholders. Samsung Electronics will increase dividends to shareholders next year, and will implement shareholder-friendly policies," said a senior executive.
The company's shares rose to 1.5 million won per share late last year; however, they have been boxed in between 1.0 million won and 1.2 million won this year due to the dismal performance of its key smartphone business, according to market analysts.
The company will buy back 1.65 million common shares and 250,000 preferred shares.
The move follows similar plans earlier this year by Hyundai Motor and affiliate Kia Motors, which were also aimed at improving shareholder value.
"The buyback plan will help Samsung owners tighten their grip on the conglomerate amid the ongoing moves for a transition of power from Samsung Chairman Lee Kun-hee," Yoon Ji-ho, head of research at E-Trade Investment, said.
Noh Geun-chang, head of research at HMC Investment, said the decision will ease mounting concerns among investors over the firm's corporate future as the plan is a message showing the company's increased confidence in improving profits next year.
"Samsung Electronics shares will rise to 1.3 million, shortly," he said.
The plan comes a few hours after it decided to divest itself of its chemical and defense businesses by selling major stakes in affiliated companies to Hanwha Group for 2 trillion won ($1.8 billion).
This is the first time for the conglomerate to sell off leading affiliates to a local corporation since the Asian Financial Crisis in late 1997.
In an effort to stabilize its dwindling profits, Samsung plans a major restructuring in management that will be announced either Dec. 2 or 3.
"Samsung Electronics and Samsung C&T ― two major affiliates holding big stakes in Samsung Techwin and Samsung General Chemicals ― decided to sell their stakes to Hanwha for 1.9 trillion won," Samsung said in a statement.
The deal will be finished within the first half of next year.
Samsung C&T and four other Samsung affiliates decided to sell their combined 32.4 percent stake in Samsung Techwin to Hanwha for 840 billion won.
They also agreed to sell their 57.6 percent stake in Samsung General Chemicals to Hanwha Chemical and Hanwha Energy for 1.06 trillion won.
The control of Samsung Thales, a joint venture unit with French defense electronics firm Thales, and Samsung Total Petrochemicals, a joint venture unit with France's Total, is also being transferred to Hanwha, the statement said.
That means that Samsung will completely drop its defense business after 30 years.
"This is a huge but expected deal as Samsung has recently been on track to fundamentally reform its business portfolio with top management giving more authority to businesses that show a steady improvement," a Samsung executive told The Korea Times.
Chief executives and presidents of leading Samsung affiliates declined to comment despite repeated requests after Wednesday's weekly regular meeting at Samsung's Seocho office, southern Seoul.
"I heard about the news early this morning via local media reports," said Samsung Vice Chairman Kang Ho-moon. Yoon Boo-keun, president of Samsung Electronics' consumer division also refused to provide any comment.
In a separate statement, Hanwha Group said the deal will help the mid-tier local conglomerate become the country's ninth-biggest chaebol with total assets of 50 trillion won.
"The acquisition of Samsung affiliates will significantly help us further solidify our leadership in the defense and chemical fields," Hanwha said.
To fund the deal, a Hanwha spokesman said it's unlikely that the firm will sell its life insurance unit, as payments will be made over the next three years.
"We have no plan to sell our life insurance affiliate. It's true our affiliates are now in tough conditions as our plans to find next revenue generators have been in the doldrums. But there won't be any serious problems with payments."
Hanwha reported 64.4 billion won in net profit for the first nine months of this year out of 3.5 trillion won in revenue. Cash-equivalent assets as of September this year were 71.7 billion won.
Hanwha Chemical generated 21.9 billion won net profit out of 2.73 trillion won in revenue during the first three quarters, while Hanwha Energy saw 90 billion won from 339 billion won, it said in a filing to the Korea Exchange.
"As Hanwha is required to invest in manufacturing facilities, it has no option but to sell some stakes in its affiliates or bring financial investors to hedge the acquisition risk," said Kium Securities analyst Kim Ji-san.
Last week, Samsung Heavy Industries had to call off a merger with Samsung Engineering after shareholders claimed buyback rights.
"Today's announcement has been in line with Samsung management's decision to reform its business structure focusing on electronics, finance, construction and plants," Kim said.
By Kim Yoo-chul
Samsung Electronics announced late Wednesday that the firm will buy back 2.19 trillion won ($2 billion) worth of its own shares in a bid to stabilize its shares and improve shareholder value.
This is the first time in seven years that the tech giant has utilized a buyback plan. In January 2007, it bought 1.8 trillion won worth of its own shares.
"The decision was aimed at boosting value for our shareholders. Samsung Electronics will increase dividends to shareholders next year, and will implement shareholder-friendly policies," said a senior executive.
The company's shares rose to 1.5 million won per share late last year; however, they have been boxed in between 1.0 million won and 1.2 million won this year due to the dismal performance of its key smartphone business, according to market analysts.
The company will buy back 1.65 million common shares and 250,000 preferred shares.
The move follows similar plans earlier this year by Hyundai Motor and affiliate Kia Motors, which were also aimed at improving shareholder value.
"The buyback plan will help Samsung owners tighten their grip on the conglomerate amid the ongoing moves for a transition of power from Samsung Chairman Lee Kun-hee," Yoon Ji-ho, head of research at E-Trade Investment, said.
Noh Geun-chang, head of research at HMC Investment, said the decision will ease mounting concerns among investors over the firm's corporate future as the plan is a message showing the company's increased confidence in improving profits next year.
"Samsung Electronics shares will rise to 1.3 million, shortly," he said.
The plan comes a few hours after it decided to divest itself of its chemical and defense businesses by selling major stakes in affiliated companies to Hanwha Group for 2 trillion won ($1.8 billion).
This is the first time for the conglomerate to sell off leading affiliates to a local corporation since the Asian Financial Crisis in late 1997.
In an effort to stabilize its dwindling profits, Samsung plans a major restructuring in management that will be announced either Dec. 2 or 3.
"Samsung Electronics and Samsung C&T ― two major affiliates holding big stakes in Samsung Techwin and Samsung General Chemicals ― decided to sell their stakes to Hanwha for 1.9 trillion won," Samsung said in a statement.
The deal will be finished within the first half of next year.
Samsung C&T and four other Samsung affiliates decided to sell their combined 32.4 percent stake in Samsung Techwin to Hanwha for 840 billion won.
They also agreed to sell their 57.6 percent stake in Samsung General Chemicals to Hanwha Chemical and Hanwha Energy for 1.06 trillion won.
The control of Samsung Thales, a joint venture unit with French defense electronics firm Thales, and Samsung Total Petrochemicals, a joint venture unit with France's Total, is also being transferred to Hanwha, the statement said.
That means that Samsung will completely drop its defense business after 30 years.
"This is a huge but expected deal as Samsung has recently been on track to fundamentally reform its business portfolio with top management giving more authority to businesses that show a steady improvement," a Samsung executive told The Korea Times.
Chief executives and presidents of leading Samsung affiliates declined to comment despite repeated requests after Wednesday's weekly regular meeting at Samsung's Seocho office, southern Seoul.
"I heard about the news early this morning via local media reports," said Samsung Vice Chairman Kang Ho-moon. Yoon Boo-keun, president of Samsung Electronics' consumer division also refused to provide any comment.
In a separate statement, Hanwha Group said the deal will help the mid-tier local conglomerate become the country's ninth-biggest chaebol with total assets of 50 trillion won.
"The acquisition of Samsung affiliates will significantly help us further solidify our leadership in the defense and chemical fields," Hanwha said.
To fund the deal, a Hanwha spokesman said it's unlikely that the firm will sell its life insurance unit, as payments will be made over the next three years.
"We have no plan to sell our life insurance affiliate. It's true our affiliates are now in tough conditions as our plans to find next revenue generators have been in the doldrums. But there won't be any serious problems with payments."
Hanwha reported 64.4 billion won in net profit for the first nine months of this year out of 3.5 trillion won in revenue. Cash-equivalent assets as of September this year were 71.7 billion won.
Hanwha Chemical generated 21.9 billion won net profit out of 2.73 trillion won in revenue during the first three quarters, while Hanwha Energy saw 90 billion won from 339 billion won, it said in a filing to the Korea Exchange.
"As Hanwha is required to invest in manufacturing facilities, it has no option but to sell some stakes in its affiliates or bring financial investors to hedge the acquisition risk," said Kium Securities analyst Kim Ji-san.
Last week, Samsung Heavy Industries had to call off a merger with Samsung Engineering after shareholders claimed buyback rights.
"Today's announcement has been in line with Samsung management's decision to reform its business structure focusing on electronics, finance, construction and plants," Kim said.
