Lee family’s ownership in Samsung remains intact after inheritance Owner’s family members use loans rather than stock sale to fund first tax payment

Translated by Ryu Ho-joung 공개 2021-05-07 08:10:01

이 기사는 2021년 05월 07일 08:04 더벨 유료페이지에 표출된 기사입니다.

The Lee family’s ownership in Samsung has remained intact after the late chairman Lee Kun-hee’s stockholdings were inherited by his wife and three children, with the first part of a 12 trillion won ($10.8 billion) inheritance tax bill paid through loans rather than a sale of shares.

Samsung’s Lee family has taken out a combined about 1.72 trillion won in loans secured by shares in the conglomerate’s key affiliates in order to pay a first 2 trillion won installment of inheritance taxes.

A regulatory filing said Hong Ra-hee, who inherited a third of her late husband’s 249 million shares or 3.41% in Samsung Electronics, used some 46 million shares as collateral to get loans totaling 1 trillion won from four lenders Woori Bank, Hana Bank, Korea Securities Finance Corp and Meritz Securities.

The late chairman’s two daughters, Boo-jin and Seo-hyun, also took out a combined 717.1 billion won debt, which were secured by their shares in Samsung C&T and Samsung SDS. The sisters each inherited 0.93% of Samsung Electronics but did not use them as loan collateral this time.

There had been speculation that the Lees could sell off part of their shareholdings to fund inheritance taxes. But they chose debt over stock sale, and consequently, their overall ownership in Samsung Electronics remained intact without share dilution.

After the inheritance, Lee’s family members, including the late chairman’s son and group’s de facto leader Lee Jae-yong, have a combined 21.2% ownership in Samsung Electronics directly and through shareholdings in other Samsung affiliates. Their control over the flagship company has remained largely unchanged from 1988 when Samsung Electronics as it is known today was founded.

The Lee family has been exploring options to increase its direct ownership in Samsung Electronics since the late chairman became incapacitated following a heart attack in May 2014. One option that had been rumored to be available was to merge the company with Samsung SDS. Before the inheritance, Lee Jae-yong held only a 0.67% stake in Samsung Electronics but owned 9.2% of Samsung SDS. His two sisters also each had a 3.9% interest in the IT services company.

Another option that had been discussed was to shift the conglomerate into a holding company structure. Three years ago, Kim Sang-jo, the then chairman of Korea Fair Trade Commission, argued that it was desirable to convert Samsung C&T into a holding company that controls Samsung Life Insurance and Samsung Electronics, with the two companies controlling the conglomerate’s financial services and non-financial services affiliates respectively. But such restructuring was legally impossible and also challenged by shareholders and market experts.

There was also an option to use Samsung C&T to strengthen the owner family’s direct control of Samsung Electronics by letting it purchase the company’s shares held by other affiliates or receive the late chairman’s shares. But Samsung C&T did not have the financial capacity to fund such plans. The criticism could also have been made that the owner’s family tried to pass on tax burden to an affiliate.

The Lee family will pay the five remaining installments of inheritance taxes by 2026, but sale of shareholdings is still very unlikely because the Lees have shares in Samsung Life Insurance and Samsung Electronics, which can be used as collateral for additional loans. (Reporting by Choong-hee Won)
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