Lee Jae-yong forecast to take father's shares to tighten grip

The Korea Times

The Korea Times

Business

Wed, November 29, 2023 | 06:27

Tech

Lee Jae-yong forecast to take father's shares to tighten grip

Posted : 2021-04-28 16:36

Updated : 2021-04-29 09:17

Samsung owner family postpones allocation of Lee Kun-hee's shareholdings

By Baek Byung-yeul

Samsung Group announced Wednesday that the heirs of the late Chairman Lee Kun-hee will pay over 12 trillion won ($10.8 billion) in inheritance tax over the next five years, but did not detail the allocation of his shares in the group affiliates ― including the crown jewel, Samsung Electronics ― to his children.

Given the shares allocation could directly affect the conglomerate's organizational structure, the issue has been of primary concern, and questions are being asked as to why Samsung deferred an announcement on how the late chairman's shareholdings will be divided.

Samsung Group has retained a web-like governance structure linking Samsung C&T, Samsung Life Insurance and Samsung Electronics. The late chairman owned 4.18 percent of the shares of Samsung Electronics, 20.76 percent of Samsung Life Insurance, 2.88 percent of Samsung C&T and 0.01 percent of Samsung SDS.

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According to law, his widow, Hong Ra-hee, will inherit the largest share of 33.33 percent, while the only son, Samsung Electronics Vice Chairman Lee Jae-yong, and two daughters, Hotel Shilla CEO Lee Boo-jin and Samsung Welfare Foundation Chairwoman Lee Seo-hyun, will get 22.22 percent each.

But industry officials have forecast Lee's shares will be primarily distributed to his son so that the de facto leader of Samsung can strengthen his hold on the conglomerate.

Regarding this, a Samsung Group official said, "There is no disagreement over the distribution of the late chairman's shareholdings between the bereaved family members. The details of the stock split will be announced later."

The vice chairman only owns a 0.7 percent stake in Samsung Electronics, but has wielded control over the tech giant as he holds a 17.48 percent stake in Samsung C&T, which itself holds a 19.34 percent stake in Samsung Life Insurance, which owns an 8.51 percent stake in the electronics giant.

With various options presented, industry analysts presume that most of the late chairman's shares in Samsung Electronics will be given to his son, and the four family members will have an equal share of Lee's stake in Samsung Life Insurance.

"Under this plan, the vice chairman will be able to strengthen his direct control over Samsung Electronics, while dividends coming from the company will help him reduce the inheritance tax payments burden," said Kim Dong-yang, a researcher at NH Investment & Securities.

The bereaved family has already made statements to the financial regulator, saying they will jointly own the late chairman's 20.76 percent share in Samsung Life Insurance. According to the Financial Services Commission, the family filed this information with the financial regulatory body April 26. The details of how the stocks will be shared will be disclosed later.

Samsung said the inheritance tax payment, amounting to over 12 trillion won, was "one of the largest ever in Korea and globally, equivalent to three to four times the Korean government's total estate tax revenue last year."

Stating that the heirs will pay the full amount of the tax over a period of five years in six installments starting this month, the Lee family said, "it is our civic duty and responsibility to pay all taxes."

baekby@koreatimes.co.kr