Tue, Sep 02, 2014 - Page 15 News List

Samsung’s shipbuilding, engineering units to merge

AFP, SEOUL

Several ships are docked at Samsung Heavy Industries’ shipbuilding yard in Geoje, South Korea, on Oct. 18, 2007.

Photo: Reuters

The shipbuilding and engineering units of South Korea’s Samsung group said yesterday they would merge, as the family-run giant gears up for generational ownership succession.

The board members of Samsung Heavy Industries Co Ltd, the world’s third-largest shipmaker, and Samsung Engineering Co had approved the tie-up via a share swap, said a joint statement.

Shareholders at the engineering unit are to 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 the 25 trillion won recorded last year, the statement said.

Samsung Heavy Industries focuses on shipbuilding and offshore plants while Samsung Engineering builds 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.

Samsung Heavy shares and Samsung Engineering shares jumped by 6.61 percent and 12.2 percent respectively, in trading on the Seoul stock market yesterday.

The country’s top business group has dozens of units, including Samsung Electronics Co — 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 a 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 pressure from the South Korean government to unravel its complex cross shareholdings and make its governing structure more transparent. The group plans to take public two units to meet tighter government rules and to eventually help the junior Lee pay vast inheritance taxes worth billions of US dollars.

The 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 this year 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 phone business.

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