SEOUL (Reuters) - South Korean conglomerate Samsung Group said on Sunday its battery-making arm Samsung SDI Co Ltd (>> Samsung SDI Co Ltd) will sell $622 million (419 million pounds) worth of shares in sister firm Samsung C&T Corp (>> Samsung C&T Corp) to comply with regulatory requirements.

South Korea's Fair Trade Commission (FTC) had said earlier in the day that Samsung Group must weaken or break three of its circular shareholding chains that it deemed had been strengthened by the all-stock merger in September.

The ruling concerns Samsung SDI's stake in Samsung C&T Corp (>> Samsung C&T Corp), which was formerly known as Cheil Industries Inc before it took the name of a sister construction firm it merged with. SDI held stakes in both firms prior to the deal, and the FTC said the deal added shares held by SDI in three chains - two involving SDI and Cheil and another involving SDI and the construction arm. This is against South Korean laws.

Samsung Group has until March 1, 2016 to either have Samsung SDI sell a 2.6 percent stake in Samsung C&T, worth 727.5 billion won (419 million pounds) based on Thursday's closing price, or break the three chains completely. SDI currently holds a 4.7 percent stake in C&T.

The ruling could weigh on Samsung C&T's share price but will not endanger the founder Lee family's hold over the firm or the larger electronics-to-fashion conglomerate. De facto leader Jay Y. Lee and his siblings control nearly 40 percent of the firm through direct stakes and shares held by other related parties, including affiliates. Samsung C&T is considered a key vehicle through which the Lees control top affiliates such as Samsung Electronics Co Ltd (>> Samsung Electronics Co Ltd) and Samsung Life Insurance Co Ltd (>> Samsung Life Insurance co., Ltd).

A Samsung Group spokeswoman said SDI would comply by disposing the 5 million Samsung C&T shares and consider options to minimise the potential market impact from selling the shares. She said SDI was considering asking the regulator for an extension on the sale deadline.

(Reporting by Se Young Lee; Editing by Jacqueline Wong)

By Se Young Lee