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THE INVESTOR
February 22, 2020
Big Reunion

Samsung

Compensation disagreement kills Samsung SDS-Allegion talks

  • PUBLISHED :June 01, 2017 - 17:09
  • UPDATED :June 01, 2017 - 18:21
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[THE INVESTOR] Disagreement over employee compensation was reportedly the key reason why Samsung SDS and Ireland’s Allegion recently called off their months-long talks on the sale of the Korean firm’s door lock business, industry sources said on June 1.

Samsung SDS, the IT solutions unit of Samsung Group, announced the breakdown on May 26, saying, “We did considered the sale of its home network business but decided to withdraw the plans.”




Related:
Samsung SDS drops plans to sell home network biz
HP says no layoffs in Korea after acquisition of Samsung’s printer division


Sources said the Korean firm continued talks with Allegion, the Dublin-based security solution developer, since November but they failed to reach an agreement due to difference in pricing, especially on the huge amount of employee compensation.

“Employee compensation, unique to Korea, is one of the key factors for a merger and acquisition deal here,” a source familiar with the deal told The Investor on condition of anonymity. “Allegion is said to have expressed concerns about the growing costs as it was considering a sizeable restructuring after the acquisition.”

A large Korean firm usually offers employees lump sum money as compensation to soothe their resistance when they sell a company. Failed talks with employees affect the whole deal process, sometimes killing the talks altogether.

Samsung, among others, has been embroiled in several talks with employees as it is selling off less profitable businesses in recent years amid its ongoing business restructuring ahead of a leadership transfer to a new generation.

More recently, Samsung Electronics sold its printer business to HP for US$1.05 billion, with the deal set to be closed within the first half of this year. The two firms agreed on a combined 110 billion won (US$98 million) package as employee compensation, equivalent to 60 million won for each of some 1,800 employees, as well as job security for five years.

“Samsung and HP agreed to pay for half the costs, respectively,” said another source who also declined to be named. “The selling and buying firms prefer to share an equal amount when it comes to employee compensation.”

Samsung SDS sees less than 2 percent of its total revenue, or 160 billion won, from the home network business. About 100 billion won comes from the door lock business.

Allegion, which acquired Milre Systek, the nation’s No. 1 digital door lock maker, in 2015, has expressed keen interest in taking advantage of Samsung’s brand name and sales channel in the soaring home security market.

Despite the breakdown of latest talks, some sources say the company could seek to sell the business again considering several bidders, including strategic investors, are showing interest in the lucrative business.

By Lee Ji-yoon (jylee@heraldcorp.com)

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