April 27, 2024

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[THE INVESTOR] With the special counsel team investigating the recent presidential scandal seeking an arrest warrant against Samsung Group Vice Chairman  Lee Jae-yong over bribery charges, the business restructuring plan at South Korea’s largest conglomerate is expected to face a long and bumpy road ahead, according to analysts.

The possible arrest of the Samsung heir will especially deal a blow to Samsung SDS, which is at the center of the conglomerate’s power succession from ailing Samsung Chairman Lee Kun-hee to the junior Lee. 

SDS has been preparing to split itself into two -- IT and logistics companies -- which are forecast to be merged, respectively, with Samsung Electronics and trading firm Samsung C&T.

Its global offices including those in China and the US have already split off their IT solutions unit.

Some market watchers said the possible leadership vacuum could slow down SDS’s spilt-off scheme, and the overall plan for power transition.

“Although the Samsung affiliates will carry on their business as usual, holding a scheduled shareholders meeting, it now seems hard to predict the results of the conglomerate’s ongoing restructuring drive,” Lee Jong-woo, a head researcher from IBK Securities

“A restructuring plan to solidify Lee’s control over the conglomerate, utilizing his stake in SDS, has lost steam.”

Lee is the largest individual shareholder of SDS and C&T -- holding a 9.2 percent stake and a 17.23 percent stake, respectively -- while the trading firm is the second largest shareholder of the tech giant with a 4.1 percent stake.

The anticipated merger between the Samsung affiliates will likely reinforce Lee’s control over the tech giant, in which he currently owns a 0.59 percent stake.

The special counsel team probing the corruption scandal involving President Park Geun-hye and her longtime crony Choi Soon-sil said on Jan. 16 that it has requested a Seoul court to issue an arrest warrant for the Samsung vice chairman over bribery, perjury and embezzlement charges.

The investigators said the conglomerate bankrolled Choi’s businesses in exchange for her backing of the merger plan for C&T and Cheil Industries in July 2015.

Samsung offered 8 billion won (US$6.80 million) to Core Sports, a bogus company run by Choi, as part of a 22-billion-won consulting contract in 2015. It also made contributions worth 20.4 billion won to the Mir and K-Sports foundations, associated with Choi, and offered 1.6 billion won to a youth sports club run by her niece Chang Si-ho.

The investigation team said that Park’s confidante Choi, who wielded unusual influence over government organizations and business circles, allegedly forced the National Pension Service -- the then-largest shareholder of C&T -- to vote in favor of the merger between the trading firm and Cheil Industries in a shareholders meeting.

As a result of the ongoing probe, there could be many more lawsuits to nullify the Samsung C&T-Cheil merger, according the IBK researcher.

A lawsuit filed by a group of minority shareholders of C&T is currently underway at the Seoul court.

By Kim Young-won (wone0102@heraldcorplcom)