Samsung Group announced today the merger of two major affiliates, as the South Korean business giant accelerates restructuring efforts ahead of a generational power transfer within the founding Lee family.
The all stock deal, approved by the boards of both companies, would see Samsung's de facto holding company Cheil Industries--which has interests from fashion to theme parks--acquire general trade and construction affiliate Samsung C&T.
The merger, which is expected to be completed by September pending shareholder approval, will see Cheil offer 0.35 new shares for each Samsung C&T share.
The two companies are both listed on the Seoul stock market, with Cheil valued at 22 trillion won (USD 2 billion)and Samsung C&T 8.6 trillion won as of Tuesday morning.
The combined company--which will take the Samsung C&T name--will target annual sales of about 60 trillion won in 2020, compared with their combined sales of 34 trillion won in 2014, Samsung said in a statement.
"The two companies expect to create synergy by combining their construction businesses, while Samsung C&T's global network will help develop new opportunities overseas for Cheil's fashion, resort and catering businesses," the statement said.
Share prices of both Cheil Industries and Samsung C&T soared by the daily limit of 15 percent on Tuesday. Today's announcement was the latest in a series of moves apparently aimed at solidifying the Lee family's grip on the sprawling behemoth.
The family-run Samsung Group, currently chaired by Lee Kun-Hee, has merged, broken out or newly listed some of its key units in recent years as he prepares to hand over the reins to his son, J Y Lee.
The Lee family controls the vast Samsung Group via a complex web of cross shareholdings across the group's subsidiaries, including Cheil, where J Y Lee has a controlling stake. Samsung C&T has a four percent stake in Samsung Electronics--the group's flagship unit and the world's top maker of smartphones and mobile phones.
The Lee family currently has a less than five percent stake in Samsung Electronics, a holding that will be boosted by the merger.
"This is a merger of the two most important Samsung units from the perspective of the heir," said Lee Kwang-Soo, analyst at Seoul-based Mirae Asset Securities.
Recent health problems concerning the senior Lee, currently bedridden after suffering a heart attack last year, prompted the group to step up restructuring efforts.