In a surprising turn of events, Samsung Electronics is contemplating whether or not the company should split into different divisions. Such a division would serve an apparent purpose, as the founding family members would strengthen their position on the smartphone arm of Samsung. Moreover, the split could eventually boost shareholder value, although that is still a bit early to tell.
Splitting Samsung Electronics Into Different Entities
The split of the electronics giant into separate divisions has yet to be approved by the board of directors. They will meet on Tuesday and look over the proposals to determine the best course of action for the company. Such a spinoff would send shockwaves through the electronics industry, though.
To be more precise, the split would see Samsung Electronics divide itself into a holding vehicle on the one hand, and an operating company on the other hand. The holding vehicle would serve ownership purposes of the Lee family, who created Samsung Electronics and still rule the company to this very day.
Additionally, the split would see Samsung Electronics pay a US$26bn dividend, as well as make an official pledge to return three-quarters of free cash flow to investors. That threshold could end up being much higher, depending on what the board of directors decides to do. Finally, several new independent directors would need to be appointed, although it remains unclear who is fit to fill that position.
Restructuring plans are not uncommon in the business world, even though the change would bring a fair few changes to Samsung Electronics as we know it today. Then again, this restructuring has always been a part of the company plans, ever since Jay Y. Lee took over the reigns from his father not too long ago.
This news has nothing to do with the recent Samsung hardware failures, though. Incidents like those can always occur, and are not unique to Samsung Electronics, either. Although the exploding batteries have hurt the company in the PR department, their quarterly results remain strong, and Samsung is still a top brand in the smartphone industry.
Investors and traders are keeping a close eye on these restructuring plans. Stocks of the electronic giant may respond inadvertently to this news, depending on what the outcome will be. Financial experts, however, predict an upward trend in value of Samsung shares, although one never knows how the market will respond.
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