Samsung group is to take over construction company Samsung C&T in an $8 billion (£5.1 billion) merger of two Samsung affiliates, considered one of South Korea's most controversial mergers.
The world’s largest smartphone manufacturer was given approval by shareholders of Samsung C&T today (July 17th). The firm will be taken over by holding company Cheil Industries, which is part of the Samsung group.
The merger is opposed by some of Samsung C&T's shareholders, led by US hedge fund Elliott Associates, which filed several unsuccessful lawsuits to stop the merger from going ahead, arguing that it would undervalue the company's stock.
However, the move will help Samsung's founding family consolidate control of the conglomerate, especially as the business empire's patriarch Lee Kun-hee has been in hospital since May 2014 and his son Lee Jae-yong is to take a bigger leadership role, the BBC reports.
Shares in Samsung C&T tumble
The merger will give Mr Lee a direct 16.5 per cent stake in the merged entity, which will retain the Samsung C&T name and re-list on September 15th.
Shares in Samsung C&T and Cheil Industries fell 10.4 per cent and 7.7 per cent respectively after the merger was approved.
The announcement comes after Samsung forecast operating profits of 6.9 trillion won ($3.9 billion), down four per cent from the same quarter last year. It said sales declined eight per cent to 48 trillion won.
Analysts put the blame on Samsung’s flagship smartphone series, the Galaxy S6, with the regular S6 didn’t selling as well as expected. Meanwhile, the S6 Edge proved hard to manufacture, with Samsung struggling to keep up with demand.
“The failure to manage the initial shipment for the Galaxy S6 series is the primary reason” for disappointing sales, Lee Ka-keun, an analyst at KB Securities, told the AP. Samsung said it is bringing on a third plant to boost production.
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