When Samsung Electronics Group chairman Lee Kun Hee dies, high inheritance taxes and public pressure could spell the loss of family control of Samsung Group,
Bloomberg reported.
Lee, 72, has been in the hospital for more than two months after suffering a heart attack. His family will face a tax bill that could exceed $5 billion, the Bloomberg article said.
The Lee family controls the 74 companies in Samsung Group via a network of cross-shareholdings, although they own less than 2% of the total stock, the Bloomberg report noted. Lee's son, Lee Jae Yong, “will have to loosen the family's hold and ease protections against outside shareholders just as Samsung Electronics Co. faces rising challenges to its position at the top of the smartphone market,” the article said.
The family plans to take two Samsung businesses public to help pay the inheritance taxes and comply with new government restrictions on conglomerates, the article said. One of the companies going public is technology services provider Samsung SDS Co. The other is Cheil Industries Inc., formerly known as Samsung SDS Co. Cheil, which operates zoos, golf courses and a water park, “is the family's de facto holding company, with direct and indirect stakes in the electronics, finance and trading arms,” the Bloomberg article said.
Currently, Lee Jae Yong, also known as Jay Y. Lee, holds 25% of Cheil. His two sisters have 8.4% each, and Lee Kun Hee has 3.7%. The rest of the shares are held primarily by other companies in the group, the report noted
Chung Sun Sup, CEO of corporate research firm Chaebul.com, told Bloomberg, “The market is somewhat jittery about Samsung's future without Chairman Lee.” He noted that Lee Jae Yong is viewed as unproven. However, Min Jin Gui, author of
Samsung Culture 4.0,
told Bloomberg, “If Jay Y. can untangle the complicated structure, which even his father couldn't solve, he may build his own reputation.” (Source: Bloomberg, July 23, 2014.)
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