Third-generation Samsung heir Lee Jae-yong is betting that more dividend increases and a new independent director will buy some time amid growing calls for a restructuring of South Korea’s biggest conglomerate.
As part of an overhaul unveiled Tuesday, the group’s crown jewel, smartphone maker Samsung Electronics Co., said it would boost its dividend by 30% from last year, appoint a globally minded board director and seek to keep its cash pile below 70 trillion Korean won ($60 billion) in the long term.
But the announcement lacked details on how Samsung plans to simplify the conglomerate’s ownership structure, which consists of 58 affiliates bound together by cross-shareholdings.
Instead, Samsung said it had hired external consultants to advise on the possibility of creating a holding-company structure with a potential listing overseas, though it cautioned that the process would take at least six months.
Mr. Lee, 48 years old, has signaled his intention to try to streamline the tangle of affiliates that constitutes the Samsung empire as he prepares to take the reins from his ailing father. Shareholders and South Korean government officials have also been pushing for a simpler, more transparent corporate structure at Samsung.
Samsung’s measures come after U.S. activist hedge fund Elliott Management Corp. in October called on Samsung Electronics to split itself in two and then merge half the company with the conglomerate’s de facto holding company, Samsung C&T Corp. Elliott also called for Samsung to issue a one-time dividend and then promise to return at least 75% of the company’s profits each year after capital expenditures.
While Tuesday’s changes fell short of what Elliott called for last month, the changes could be enough to appease some shareholders. Samsung Electronics has increased dividends and buybacks over the past several years, which have helped its shares rise to record highs despite a smartphone recall that has cost it more than $5 billion.
“We’re pleased to see positive movement in terms of continuing to study the corporate structural reform,” said Jason Subotky, portfolio manager for Yacktman Asset Management in Austin, Texas, which manages $16 billion and has about $900 million invested in Samsung, making it one of the firm’s largest positions.
“Getting a good structure in place for the long term is a good thing,” Mr. Subotky said, adding that he liked “the general tone and the willingness to consider other options and good structures that are positive for shareholders.”
A spokesman for Elliott didn’t respond to requests for comment.
The boost in dividends and buybacks also underscores Samsung Electronics’ new willingness to part with more of its cash pile, which totaled roughly 83 trillion won at the end of September. Two weeks ago, the smartphone maker spent $8 billion in an all-cash deal to acquire Harman International Industries Inc., a maker of automotive technology.
In addition to corporate restructuring, Samsung also said that it would add a company director with international corporate experience to add diversity to a board that now consists of nine Korean men. Elliott had sought three new independent directors. It will also establish a governance committee made up entirely of independent board members to replace a corporate social-responsibility committee.
The lack of details on restructuring Tuesday sent Samsung C&T shares down 8.6% to their lowest level since July. Samsung Electronics finished the day unchanged.
