Shares in Samsung Electronics have hit a record high after activist investor Elliott Management proposed a radical corporate shake-up.
The US hedge fund is urging the tech giant to streamline its business, which makes consumer electronics including smartphones and televisions.
It believes the restructure would put the world’s largest smartphone maker on equal footing with its global rivals.
The news pushed up Samsung’s shares by as much as 5% to a new record.
In a letter made public this week, the activist hedge fund said that the “unnecessarily complex” structure of the Samsung Group empire was weighing on the shares of Samsung Electronics.
Samsung Electronics is part of a conglomerate controlled by the Lee family (pictured), which also owns stakes in the real estate, insurance and fashion industry in South Korea.
It has been hailed the crown jewel of business, but it is caught up in the Samsung web.
Elliott Management is proposing to pull out Samsung Electronics from the labyrinth and relist it. The new Samsung Electronics operating business would be listed in New York and Seoul.
Elliott also wants the company to pay shareholders about 30 trillion Korean won ($27bn; £20.6bn) in special dividends and add three independent directors to the board.
Affiliates of the New York-based hedge fund own nearly two-thirds of Samsung Electronics.
New woes
The proposal came as the tech giant faced fresh claims of problems with its flagship Galaxy Note 7 smartphone, following a report that a handset started emitting smoke inside a US plane on Wednesday.
The impact of Samsung’s recall of 2.5 million devices is set to show up in modest earnings growth guidance expected on Friday.
In a statement, Samsung said it would “carefully review” the proposals by Elliott, even though attempts by the hedge fund to bring about change in the company ended badly last year.
But investors and analysts believe Elliott’s latest attempt could pave the way for the Lee family to embrace change.
“A lot of foreign investors in Samsung believe that the company is undervalued,” said Andrew Milroy from the Singapore based consultancy firm, Frost and Sullivan.
“They believe that its complex corporate structure is responsible for this.”
“Many of these investors want to simplify Samsung’s corporate structure and improve governance in order to increase the value of the firm,” Mr Milroy told the BBC.
Critical time
“This came at the right time for Samsung,” said Daishin Economic Research Institute analyst Ahn Sang-hee.
“It’s as if someone came and hit their cheek just when they wanted to cry. In Samsung Group’s case, they have probably wanted to say something like this and now a foreign stakeholder has spoken up.”
The future of Samsung, including its succession plans, has been under intense scrutiny since the group’s patriarch, 74-year-old Lee Kun-hee, was incapacitated by a heart attack in May 2014. (BBC)
