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Samsung set for shopping spree

With release of Lee Jae-yong, M&As are back on the table
Feb 06,2018
As an appeals court has suspended Samsung Electronics Vice Chairman Lee Jae-yong’s five-year prison term and released him after 353 days in police custody, a management vacuum at the company has come to an end.

The de facto leader of the country’s most valuable company now faces the challenge of catching up with other global tech giants in preparing for a future led by artificial intelligence and big data - mostly through mergers and acquisitions.

Major M&As have been stalled since Samsung acquired Harman International in late 2016, while other industry leaders such as Amazon, Facebook, Google and Microsoft have been making aggressive acquisitions in the past year. Lee is expected to go on a global shopping spree of either fledgling or established firms in the near future.

Perhaps mindful of Lee’s potential release, Kim Hyun-suk, president of Samsung’s consumer electronics division and Samsung Research, told reporters earlier this month that the company was reviewing the acquisition of a sizable number of companies, but he did not provide any details.

“Large-scale M&As that require trillions of won cannot happen without decision-making by owner families under Korea’s unique business circumstances,” a longtime chaebol observer said, “because top managers on salaries won’t and can’t take responsibility should the outcome turn out to be bad.”

Samsung did not immediately release an official statement after Monday’s court ruling, but a spokesman said, “It is fortunate that Lee has been released.”

The company might imminently announce that the vice chairman will head to Pyeongchang County, Gangwon, to support the Winter Olympics there and use the international sporting event to promote Samsung.

Samsung is an official worldwide partner of the Olympic Games, and Lee’s bedridden father, Samsung Chairman Lee Kun-hee, led the campaign to bring the Winter Games to Pyeongchang as a member of the International Olympic Committee.

Monday’s ruling comes as the company is enjoying the best performance in its history. Samsung posted 53.65 trillion won ($49.4 billion) in operating profit last year, becoming the first Korean company to exceed 50 trillion won in annual operating profit.

The company also saw its fourth-quarter operating profit surge 23 percent year on year to 15.15 trillion won, propped up by a booming semiconductor market. Vigorous sales of memory chips propelled Samsung into the position of world’s top chipmaker after stealing the crown from Intel. Demand for memory chips, though, is projected to taper off this year.

Shares of Samsung edged up 0.46 percent to close at 2,396,000 won after Lee was released on Monday, rebounding from two days of decline.

The previous two sessions were affected by the company’s announcement on Jan. 31 that it would split stocks “to enhance shareholder value and expand investor base.”

Analysts believe the share split, made public just five days before the appeals court ruling, was a strategic move to placate negative public sentiment.

Samsung’s share price, which went as high as 2.87 million won last November, was overly expensive, analysts said, barring access to investors with less capital.


BY SEO JI-EUN [seo.jieun@joongang.co.kr]