Samsung heirs tap $2.1 bn block sale for inheritance taxes

The heirs of late Samsung Group Chairman Lee Kun-hee are seeking to sell their shares in Samsung Electronics Co. and other Samsung affiliates worth about 2.8 trillion won ($2.1 billion) in total to cover some of their more than 12 trillion won inheritance taxes, according to investment banking industry sources on Wednesday.

The deceased chairman’s wife Hong Ra-hee and two daughters Lee Boo-jin and Lee Seo-hyun were said to be tapping institutional demand for their shares in Samsung affiliates, including 2.2 trillion won worth of Samsung Electronics shares and 558.6 billion won worth of combined Samsung Life Insurance, Samsung SDS Co. and Samsung C&T Corp. shares, after the market closed on Wednesday.

Hong is seeking to sell the largest 19,324,106 shares of the electronics unit, followed by the second daughter and the Samsung Welfare Foundation Chair Lee Seo-hyun's 8,103,854 and her older sister and Hotel Shilla Chief Executive Officer Lee Boo-jin's 2,401,223 shares.

These shares together account for a 0.5% stake in Samsung Electronics.

The heirs reportedly hope to sell their Samsung Electronics shares at a discount of up to 2% from the closing price of 73,600 won apiece on Wednesday.

The eldest daughter Lee will also unload 1,205,718 shares of Samsung C&T, 1,511,584 shares of Samsung SDS and 2,315,552 shares of Samsung Life. Based on their closing prices on Wednesday, the sale of these shares combined will fetch up to 558.6 billion won.  

Their Samsung shares will be sold in block trade before the market opens on Thursday, and Goldman Sachs, Citibank, UBS and JP Morgan are jointly leading the deal, according to the sources.

ASTRONOMICAL INHERITANCE TAXES

The Samsung owner family’s latest Samsung share sale is a follow-up measure to their deal with Hana Bank in October last year for their share disposal.

Under the deal, Hana Bank is required to dispose of Hong’s 0.32% share in Samsung Electronics and the two daughters’ combined 0.18% share in the firm by April 30 of this year.

The proceeds from the latest share sale will be used to cover part of over 12 trillion won taxes for 26 trillion won worth of their inherited Samsung Group shares, real estate properties and artwork from the late Samsung Chairman Lee Kun-hee who passed away in October 2020.

To manage the astronomical inheritance taxes, the heirs agreed to pay them in a five-year installment plan starting April 2021.

They also took loans from banks with their Samsung affiliates’ stakes put as collateral to pay the inheritance taxes, and local banks queued up to extend credit to the heirs, which include Samsung Group’s de-facto leader Jay Y. Lee, the deceased chairman’s only son.

The two daughters already sold some of their Samsung SDS shares – 3,018,860 shares in total – in March 2021 in a block trade to collect 385.5 billion won for the inheritance taxes.

In the same month, Hong also unloaded 19,941,860 shares in Samsung Electronics for 1.4 trillion won to pay the taxes. Following the sale, her stake in the electronics giant fell to 1.97% from 2.30%.

But Samsung Electronics Chairman Jay Y. Lee has not entrusted any of his shares to banks.

Instead, he has raised funds to pay inheritance taxes by other means such as property sales and bank loans.

Chairman Lee is expected to refrain from selling his shares in Samsung affiliates to protect his and his family’s ownership of Samsung Electronics.

Korea imposes up to 50% inheritance tax, the second-highest among the OECD countries after Japan’s 55%. Asia’s fourth-largest economy also levies an extra tax on a company's largest shareholder, which can increase the rate to a maximum of 60%. 

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

Sookyung Seo edited this article.