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Samsung to unload automaking business

Samsung Card begins process of selling 19.9% stake in Renault Samsung

By Aug 18, 2021 (Gmt+09:00)

Renault Samsung's sport utility vehicle (SUV) QM6, or Koleos
Renault Samsung's sport utility vehicle (SUV) QM6, or Koleos

Samsung Group is set to withdraw from the automaking business after 26 years in the industry since establishing Samsung Motors Inc. in 1995. The group is selling its entire 19.9% stake in Renault Samsung Motors Corp. held by Samsung Card. This will end the group's cooperation with Renault Group, which started in 2000 when the French carmaker acquired what was then Samsung Motors. The move is also expected to quell speculation that Samsung may resume its automaking business.

COMPLETE BREAKUP THROUGH STAKE SALE

Samsung Card, the group’s credit card issuer, hired Samsung Securities to manage the stake sale, according to investment banking industry sources on Aug. 18. Samsung Card sent teaser letters on the sale to financial investors such as private equity firms at home and abroad last week.

Samsung likely decided on the sale as the group does not benefit from holding a stake in the loss-making automaker, while its unionized workers continue to walk out, according to the domestic business community sources.

Renault Samsung posted 79.6 billion won ($68.1 million) in operating losses last year, its first deficit since 2012. The company did not have a revenue-boosting new car launch to boost revenue this year while sales of its key models such as the sport utility vehicle (SUV) QM6, or Koleos, remained weak. Earlier this year, the company offered voluntary retirement packages to all its employees.

Its unionized workers often staged strikes. Renault Samsung is the only company that did not complete a wage deal with its employees in 2020 among the five automakers in South Korea.

Given these factors, Samsung Card is likely to try to unload the stake as soon as possible rather than seek a higher price, the IB industry sources predicted. Potential investors are expected to buy into the stake on dips when the company’s value is low and seek more returns when its earnings stabilize.

Renault Samsung logged 211.2 billion won in operating profit in 2019 with revenue of 4.7 trillion won. Investors are likely to receive dividends once the company turns to black, request Renault Group rights to sell a stake in the future, or buy shares on condition of a stock market listing.
Renault Samsung production line
Renault Samsung production line

MAKING HISTORY

The stake sale has been expected as Renault Samsung’s poor earnings and its strained relationship with its labor union boosted concerns that it is losing competitiveness. Sales at home and abroad are declining.

Samsung Group entered the automaking business by establishing Samsung Motors in 1995. Its first mid-sized sedan SM5, launched in partnership with Nissan Motor Co. in 1998, attracted drivers, but it failed to survive the 1997-98 Asian financial crisis.

Samsung Motors in 1999 filed for court receivership as it suffered from soaring borrowing costs, and Renault took it over in 2000. After that, the French group kept the Samsung trademark for brand awareness in South Korea, earning Samsung tens of millions of dollars in brand fees and dividends.

The contract for Renault Samsung to use the Samsung brand ended last year. From 2022, when the grace period ends, the name Renault Samsung will also be discontinued.

Write to Jun-ho Cha at chacha@hankyung.com

Jongwoo Cheon edited this article.

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