It was the question of the day. Rumors were spreading throughout South
Korea that Samsung was attempting to suppress news of his death. The
company vehemently denied the rumors. When renewed rumors spread in
April 2015, Samsung’s stock price, ironically, went up, signifying that
shareholders wanted an end to the uncertainty or thought Jay Lee, his
successor, would be a better leader than his father.
But if the chairman died now, Jay Lee was in a difficult spot. The royal
succession, which rested on the delicate success of complex share sales and
mergers, was far from complete—and far from guaranteed.
Under South Korean law, his father’s shares would be divided at a ratio
of 1.5 for his mother to 1 split between him and his two sisters. If she didn’t
see eye to eye with him, she could attempt to oust her son.
I had no idea what the truth was about the chairman’s health. My
company sources told me that no one, apart from the ruling Lee family and
its lieutenant, Vice Chairman G.S. Choi, was permitted access to the
chairman’s hospital suite.
On May 26, 2015, it was reported that Samsung C&T, the construction
and trading arm of the company, would be acquired by Cheil Industries, the
de facto holding company of the Samsung empire.
“Under the merger agreement, subject to approval from the two
companies’ shareholders, Cheil Industries will acquire Samsung C&T by
offering 0.35 new shares for every Samsung C&T share,” Cheil Industries
said in a press release.
“That seems...odd?” observed Bloomberg View’s Matthew Levine on
the battle to come. “Why would you sell your company for less than
nothing?”
Combing through the financial details of the merger, Levine wrote that
this was “an all-stock deal in which C&T shareholders will get a total of
about 55 million new Cheil shares, at a ratio of 0.35 Cheil shares for each
C&T share. At the time, Cheil shares traded at 163,500 won, meaning that
the deal was worth about 8.9 trillion won. (At the time, C&T’s public equity
was worth a bit more than they are now—about 12.5 trillion won, or 9.5
trillion after tax.) So C&T shareholders were getting paid considerably less
in the merger than the easily calculable value of the public stocks that C&T
owns, and C&T’s operating business was being valued at considerably less
than zero.”
Why leave Samsung C&T shareholders feeling bilked in an obvious way