Samsung may split its business into two; here’s why

Electronics giant Samsung is planning a call to update investors on its “strategic” plans for the future amid a push from US hedge fund Elliot Management to split the company in two. It has no plans to consider at parent level a merger of a holding company with Samsung C&T (028260.Korea). Investors have begun to voice concerns over the way the company is now being run.

Samsung is South Korea’s largest “chaebol”, a type of family-run business group that plays a big role in the country’s economy. Samsung has hired some advisers for assisting it in this move.

Samsung’s founding Lee family, with a minority stake, and the family’s close aides have an outsize influence over the company’s major decisions.

Elliott argued that Samsung’s relatively cheap share price could skyrocket if Samsung simplified its group structure and improved corporate governance.

Following a year marked by setbacks, Samsung is expected to unveil its plan to increase its value to shareholders on Tuesday while some investors have been vocal in suggesting the Korean manufacturer should split into two companies, according to a report from Reuters.

The board of directors will be holding a meeting on November 29 to discuss the proposal of Elliott Management, and will announce its decision afterward.

US activist hedge fund Elliott Management Corporation has also thrown its hat into the ring, echoing many calls for restructuring and also providing several ideas of its own, such as Samsung returning 75% of its profits each year after capital expenditures.

Samsung is due to respond to Elliott’s proposals by the end of the month.

Some investors also blamed the smartphone fiasco on the company’s governance structure as well.

Currently, companies within the wider Samsung Group are linked through a complicated web of cross shareholding, linking Samsung Electronics to many other Samsung’s firms and affiliates ranging from shipping, to heavy industries to insurance business.

A split in two has always been a subject of market speculation with analysts noting that such a move could help the Samsung Group founding family heirs to boost their control of the world’s top maker of smartphones, memory chips and televisions.