Samsung Group is set to merge two of its major subsidiaries in order to forge ahead with its restructuring plans. As per this deal, the de facto holding company – Cheil Industries – will take over the construction and engineering company – Samsung C&T.
The value of the all-stock deal– which is expected to close by September – stands at $8.1 billion. Meanwhile, the companies are anticipating a go-ahead from shareholders in a meeting to be held on Jul 17, 2015.
Samsung Group is run by the Lee family through a web of cross-shareholdings. Samsung C&T owns a 4.06% stake in Samsung Electronics Co. Ltd. SSNLF – the group’s flagship subsidiary – whereas the Lee family holds less than 5%.
Of late, Samsung Group has been restructuring its business while their leadership is shifting toward the new generation. A year after Lee Jae-Yong’s father, who was also the chairman of Samsung Electronics, suffered a heart attack, this 46-year old has gained increased authority over the conglomerate. The merger comes at a time when the South Korean government is pressing on the need of simplified business operations.
As per the deal, Cheil Industries is offering 0.35 new shares for every Samsung C&T share. The joint entity will run under the name of Samsung C&T. After the unification, Samsung C&T will become the fifth largest company in South Korea in terms of market capitalisation. Also, the merged entity will target annual sales of nearly 60 trillion won in 2020 in comparison to 34 trillion won recorded in 2014.
Samsung Electronics currently sports a Zacks Rank #1 (Strong Buy).
Other Stocks that Warrant a Look
Other favorably-ranked stocks in the sector include GigOptix, Inc. GIG, Mobile Telesystems OJSC MBT and Aspen Technology, Inc. AZPN. All these stocks hold the same Zacks Rank as Samsung Electronics.
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