Samsung shipbuilding and engineering units to merge
September 2, 2014, 12:03 am TWN
SEOUL--The shipbuilding and engineering units of South Korea's Samsung group said Monday they would merge, as the family-run giant gears up for generational ownership succession.
The board members of Samsung Heavy Industries, the world's third-largest shipmaker, and Samsung Engineering had approved the tie-up via a share swap, said a joint statement.
Shareholders at the engineering unit will be given 2.36 shares in the shipbuilder, it said, adding the deal would be finalized by December.
The two firms hope to achieve total sales of 40 trillion won (US$39.4 billion) by 2020 from 25 trillion won in 2013, it said.
Samsung Heavy focuses on shipbuilding and offshore plants while Samsung Engineering build onshore energy plants around the world.
"The merged company will be able to provide total solutions for both offshore and onshore plants for clients including major oil companies," the statement said.
Share price of Samsung Heavy and Samsung Engineering jumped by 6.61 percent and 12.2 percent, respectively, on Seoul stock market Monday.
The country's top business group has under its wings dozens of units including Samsung Electronics — the world's top maker of mobile phones and TVs.
The group — currently led by Chairman Lee Kun-Hee — has in recent years reorganized to pave the way for his son, Jay Y. Lee, to take the helm.
The senior Lee — largely credited with transforming the once-obscure electronics firm into the global giant — has been in hospital since May with respiratory and heart problems.
The junior Lee is currently the vice chairman of Samsung Electronics.
The Lee family controls the vast group through a highly complex web of cross shareholdings across its subsidiaries.
The family has been under growing government pressure to unravel its complex cross shareholdings and make its governing structure more transparent.
The group plans to take public two units to meet the tighter government rules and to eventually help the junior Lee pay vast inheritance taxes worth billions of dollars.
The looming succession comes as Samsung Electronics faces increasing competition from Chinese rivals and slowing demand for smartphones after years of stellar growth.
The flagship unit, which makes up for more than half of the entire group's sales and profits, saw its second-quarter profit plunge almost 20 percent from a year ago.
There is a general consensus that smartphone evolution has hit a barrier that will only allow incremental improvements on existing design and technology, rather than market-changing reinvention.
Such development bodes ill for Samsung Electronics, which earns nearly 70 percent of its profits from the mobile business.