Samsung Electronics on Friday dismissed the idea of restructuring itself in the immediate future. While speaking at the company’s annual shareholder meeting, Chief Executive Officer Kwon Oh-hyun said that it’s currently unlikely the Seoul-based conglomerate will split into two, citing “negative effects” that would follow as a result of such a move as the main reason for the firm’s reluctance to adopt a holding company structure. Kwon hasn’t elaborated on what those consequences entail but noted that Samsung is still in the process of reviewing the restructuring proposal initially made by Elliott Associates in late 2016. The U.S. hedge fund and a minority shareholder of the company proposed that Samsung splits into two and adopts a holding company structure while also paying a $26.75 billion special dividend to its investors, all with the goal of unlocking shareholder value. Elliott Associates and several other investors in Samsung have previously stated that the company’s stock is severely undervalued and a drastic restructuring they’re proposing is meant to alleviate that issue.
Following Kwon’s announcement that Samsung won’t be transitioning to a holding company structure in the near future, Samsung C&T’s shares dropped by over seven percent during afternoon trading in South Korea. Industry watchers previously believed Samsung C&T and Samsung Electronics will merge as part of the restructuring given how the former is entirely controlled by the founding Lee family and such a move would potentially solidify its grasp on the company. Additionally, investors are hoping that transitioning to a holding company structure would also increase the overall value of Samsung. In light of that fact, it isn’t surprising that many investors are unhappy with Samsung’s latest announcement seeing how the company recently said the review of Elliott Associate’s proposal will be conducted in a straightforward manner but is now claiming the transition won’t be simple and is vague when asked about specific timeframes.
Some investors believe that the restructuring was postponed by the arrest of Samsung Group’s Vice Chairman Jay Y. Lee who was recently caught in a major influence-peddling scandal that also saw Korean President Park impeached. Regardless, an update on the situation is expected to follow in the coming months.