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4-Traders Homepage  >  Equities  >  KOREA EXCHANGE  >  Samsung Engineering Co Ltd    028050   KR7028050003

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Samsung Announces Stake Sales to Realign Ownership Structure

01/28/2016 | 08:26am US/Eastern

SEOUL?Samsung Group announced a pair of deals Thursday to realign its ownership structure as heir apparent Lee Jae-yong streamlines South Korea's largest conglomerate, which is bound together by a web of complex cross-shareholdings.

Samsung Group's crown jewel, Samsung Electronics Co., said in a regulatory filing that it would sell its 37.5% stake in affiliate Samsung Card Co. to Samsung Life Insurance Co., consolidating one of the group's financial arms under the country's No. 1 life insurer.

Separately, Samsung Group said in a statement that Mr. Lee had sold a 2.05% stake in Samsung SDS Co., another key affiliate that is 22.6% owned by Samsung Electronics, to raise money for a share offering by troubled affiliate Samsung Engineering Co.

Many of the Samsung-affiliated companies' shares surged on Thursday in anticipation of the news after local media reports speculated about the moves.

Mr. Lee, the 47-year-old vice chairman of Samsung Electronics, is expected to take the reins of Samsung Group from his ailing father, who was incapacitated by a stroke in 2014.

The announcements came after Samsung Electronics warned Thursday in its quarterly earnings report of gathering headwinds in the consumer-technology industry. The company said net profit fell 40% from a year earlier, due in part to a write-down of Samsung Electronics' shareholding in Samsung Card.

The sale of Samsung Card, which is valued at 1.54 trillion Korean won ($1.27 billion), will consolidate Samsung's credit-card unit under the conglomerate's largest financial entity.

Samsung Life already owns 34.4% of Samsung Card, as well as 15% of Samsung Fire & Marine Insurance Co. The Samsung Group also has a listed securities brokerage.

Separately, Samsung said that Mr. Lee sold the shares of Samsung SDS, an IT consulting company in which Mr. Lee had a 11.2% personal stake, to help Samsung Engineering, which said last month that it would sell 1.2 trillion won in new shares to bolster its balance sheet. As part of the share offering, Mr. Lee pledged to personally backstop the deal by investing as much as 300 billion won himself.

Mr. Lee will raise roughly that amount after taxes by disposing of the Samsung SDS shares.

In 2014, Samsung Engineering and the conglomerate's shipbuilding unit, Samsung Heavy Industries Co., scrapped a planned merger after opposition from minority shareholders.

Before Thursday's announcements, Samsung Card jumped 29% in late afternoon trading before ending the day up 10%, while Samsung Life gained 12%. Samsung SDS tacked on 2.4% and Samsung Heavy rose 4%. Samsung Electronics, which disappointed investors with its earnings report, fell 2.6%.

Write to Jonathan Cheng at jonathan.cheng@wsj.com

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