Samsung C&T to cancel $2.3 bn worth of treasury shares, stocks up

Samsung C&T Corp.’s share price zoomed on Thursday on news that the company will cancel its entire treasury stock holdings worth about 2.9 trillion won ($2.3 billion) over the next five years in phases as part of its efforts to enhance shareholder value.

Samsung C&T’s common shares climbed 3.8% from the prior day to end at 115,500 won apiece on Thursday, while its preferred stock jumped 4.1% to 102,000 won, outperforming the Kospi with a 1.9% gain.

Samsung Group’s construction and trading arm, which is also the de-facto holding company of South Korea’s biggest business group, announced in a regulatory filing on Thursday that it will retire its entire treasure stock holdings including 24,718,099 common shares and 159,835 preferred shares that are equivalent to 13.2% and 9.8%, respectively, of each stock’s issued shares.

The total value of shares to be canceled is nearly 3 trillion won based on the current stock prices. The company will retire them over the next five years in phases, and its board will decide on the cancelation size every year, according to the filing.

The company has decided to retire its entire treasury stock holdings to bolster its shareholders’ value, the company said. Its stock has remained stagnant after its merger with Cheil Industries Inc. in 2015.

Stock cancellation is considered a stronger measure to boost shareholder value than share buybacks or dividend payouts because it reduces the number of shares outstanding, lifting the stock’s earnings per share (EPS).

The company also announced in the same filing that it will continue to pay out dividends at 2,000 won a piece at the least, using 60% to 70% dividend payments from its affiliates for three years until 2025.

UP TO $3.2 BILLION INVESTMENT FOR 3 YEARS

The company also vowed to invest up to 4 trillion won in total for the next three years to enhance the competitiveness of its existing businesses and nurture new growth engines.

It will spend 1.5 trillion won to 2 trillion won to upgrade the products and services of its current businesses and accelerate digital transformation.

The other half will be used to unearth new growth engines in the green energy sector, ranging from photovoltaic, hydrogen and advanced small modular reactor (SMR) to battery recycling, as well as in the bio/healthcare sector, mainly focusing on bioprocessing, contract development and investment in innovative biotechnology.   

In September 2022, the company teamed up with local partners LG Chem Ltd., Doosan Enerbility Co. and Namhae Chemical Corp. to produce and utilize hydrogen based on clean ammonia.

A month earlier, it also won an order worth 800 billion won to build solar power plants in Qatar. In the same month, The Life Science Fund, jointly launched with Samsung Biologics, announced its $15 million investment in US biotech firm Senda Biosciences. 

The company's bold investment is part of its pre-emptive measures against future uncertainties and to prepare for the future with new growth engines. 

Write to Jeong-Soo Hwang at hjs@hankyung.com

Sookyung Seo edited this article.