Samsung Splitting Into Two Companies? Major Shareholders Push For Changes

Following a year marked by setbacks, Samsung is expected to unveil its plan to increase its value to shareholders on Tuesday while some investors have been vocal in suggesting the Korean manufacturer should split into two companies, according to a report from Reuters.

The pressure to split has come primarily from the United States-based hedge fund Elliott Management, which owns 0.6 percent of Samsung. Elliott Management would like to see the company divide into an operating company and a holding company that would be in charge of ownership.

Elliott Management’s plan would also pay out $26 billion in dividend to stockholders, which is sure to be a significant motivating factor in the hedge fund’s interest in putting Samsung through a split. The hedge fund has previously attempted to challenge decisions made by Samsung, including a merger of two of its affiliates in 2015.

David Smith, head of corporate governance at Aberdeen Asset Management Asia, told Reuters, "It's difficult to argue with the logic of Elliott’s proposals," and noted, “A simpler structure is certainly preferable, and yes most would agree they can afford to pay out more.”

Samsung did not respond to request for comment on the report when asked by IBTimes, but an anonymous source told Seoul Economic Daily the Korean tech giant is considering a split.

The call for change within the company comes following a disastrous 2016 for Samsung. The company was forced to recall Galaxy Note 7 smartphones after several dozen reports of the devices exploding and resulting in considerable damage. The process was reported to cost the company $3 billion in the fourth quarter of 2016 alone, and is estimated to cost more than $5.3 billion in total.

Less prominent in the news but just as costly to the Korean manufacturer was a recall of 2.8 million washing machines following reports of injuries —including a broken jaw —caused by the machines.

The company was also subjected to several raids of its headquarters by prosecutors investigating corruption charges against South Korean President Park Geun-hye.

Samsung is expected to make an official announcement regarding the future of the company and its structure on a Tuesday conference call set to be held at 9:30 a.m. local time.