South Korea’s Samsung Electronics Co yesterday scrapped a merger between two major units, citing the spiraling cost of buying back stock from shareholders opposed to the deal.
Samsung Heavy Industries — the world’s No. 3 shipmaker — and Samsung Engineering had announced the proposed merger in September as part of a major restructuring to smooth a generational ownership succession.
Under the deal, the two firms were required to buy back shares from investors opposed to the merger.
The shipbuilding and engineering units were allowed to spend up to 950 billion won (US$857 million) and 410 billion won respectively for the buyback.
However, the Samsung shares to be returned by unhappy shareholders were valued far above the limit, the two units said in a joint statement.
“That means we have to shell out 1.62 trillion won to complete the merger, which would put great financial strain on the firms and eventually hurt our investors,” the statement said. “We thus have decided to humbly accept the intention of our investors.”
It added that the merger plan had “officially fallen apart.”
Samsung Heavy Industries focuses on shipbuilding and offshore plants, while Samsung Electronics builds onshore energy plants around the world.
The Samsung group is expected to undergo a fundamental restructuring as control of the family-run conglomerate’s primary business passes from ailing patriarch Lee Kun-hee to only son Lee Jae-yong.
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