Samsung shares jump on looming ownership reform

Shares in Samsung C&T Corp., in which Samsung Group’s owner family hold a 33.4% stake, leapt by as much as 21% in heavy trading on Oct. 26, on expectations that the conglomerate’s de facto holding company may increase dividend payouts to help the family shareholders pay inheritance taxes estimated to top 10 trillion won ($9 billion).

The South Korean group Chairman Lee Kun-hee, who died on Sunday at the age of 78, is handing over shares in listed Korean companies worth 18 trillion won to his immediate family.

Their estimated tax bill, a record for a Korean business group, will likely force them, including Samsung Electronics Co.'s Executive Vice Chairman Jay Y. Lee, to sell part of their shares in Samsung units, which may lead to its shareholding restructuring, analysts said.

Samsung C&T saw its shares rally to 126,000 won, marking its strongest daily gain since it absorbed textile maker Cheil Industries in December 2014. This compared with a 0.72% slip in the broader Kospi market.

By market close, it pared gains to close at 118,000, up 13.5%. It was the most actively traded stock on Monday, with 9.3 million shares changing hands, or more than 30 times its Friday’s trading volume. It topped the institutional investors’ buy list of the day.

“In whatever structure or shape it takes, Samsung’s ownership reform triggered by Chairman Lee Kun-hee’s death will be positive for Samsung C&T shareholders,” said KB Securities analyst Chung Dong-ik. “Given that Vice Chairman Jay Y. Lee is the largest shareholder with a 17.3% stake, Samsung C&T will not make any decision that harms its corporate value.”

KB Securities analyst Chung Dong-ik said that the trading firm is highly likely to boost dividend payouts to help its top shareholders raise cash for tax payments

Lee Kun-hee’s two daughters – Lee Boo-jin and Lee Seo-hyun –  each own 5.55% of Samsung C&T. They are set to take over their late father’s 2.88% holding in Samsung C&T, together with Jay Y. Lee and their mother Hong Ra-hee.

GAINS IN SAMSUNG LIFE, SAMSUNG SDS SHARES

Shares in Samsung Life Insurance and Samsung SDS also jumped in heavy volume as market speculation grew that the family may offload their shares in both companies for inheritance taxes. Analysts said the family would be able to maintain their grip over the two firms through other Samsung units which have controlling stakes in Samsung Life and SDS.

Samsung Life rose 3.80% to 65,500 won, after touching a two-month peak of 73,000 won. Lee Kun-hee held a 20.76% stake in the life insurer, most of which is expected to come on the market.

Samsung SDS gained 5.51% to end at 182,000 won, coming off its daily high of 190,000 won which marked its highest point in nearly five months.

Jay Y. Lee has a 9.2% stake in SDS, with his two sisters holding a combined 7.8%. Samsung Electronics and Samsung C&T own a combined 40% of the IT services provider.

A possible share sale in SDS by Samsung family shareholders may weaken the IT company’s business ties with other Samsung units, which should be positive for SDS, according to the analysts. They said SDS had given its affiliates an unfair advantage when selecting contractors.

Meanwhile, Samsung Electronics closed steady at 60,400 won, with a draft revision to the insurance industry law pending in parliament. Under the proposed bill, Samsung Life may have to reduce its 8.51% stake in the technology giant.

Write to Jae-Yeon Ko at yeon@hankyung.com
Yeonhee Kim edited this article.