Samsung shares rise after Lee's death sparks hope of shake-up

Investors bet that stake sales or restructuring will be needed to pay inheritance tax, estimated around $8.9 billion for stock holdings alone, but analysts divided on how things will pay out because of son's court cases

by Joyce Lee
Samsung shares rise after Lee's death sparks hope of shake-up
Samsung Group chairman Lee Kun-hee arrives at the office of the Federation of Korean Industries to meet President-elect Lee Myung-bak with other businessmen in 2007. Reuters file photo by Han Jae-Ho.

Shares in Samsung Electronics and affiliates rose on Monday after the death a day earlier of Chairman Lee Kun-hee sparked hopes for restructuring and stake sales, analysts said.

Investors were betting that such measures would be needed to pay a hefty inheritance tax, estimated around 10 trillion won ($8.9 billion) for stock holdings alone, although analysts were divided on which moves were most likely. 

Shares in Samsung C&T and Samsung Life Insurance rose as much as 21.2% and 15.7% respectively, while shares inSamsung BioLogics, Samsung SDS and Samsung Engineering also rose. 

"The inheritance tax is outrageous, so family members might have no choice but to sell stakes in some non-core firms" such as Samsung Life, said NH Investment Securities analyst Kim Dong-yang. 

Investors have long anticipated a shake-up in the event of Lee's death, hoping for gains from any restructuring to strengthen de facto holding company Samsung C&T's control of crown jewel Samsung Electronics, such as Samsung C&T buying an affiliate's stake in the tech giant. 

Son and heir apparent Jay Y Lee has a 17.3% stake in Samsung C&T, which owns a 5.01% stake in Samsung Electronics, the global leader in smartphones and memory chips. Samsung C&T also has a 19.3% stake in Samsung Life, the No.2 shareholder of Samsung Electronics. 

"At this point, it is difficult to expect when Samsung Group will kick off with a restructuring process as Jay Y Lee is still facing trials, making it difficult for the group's management to begin organisational changes," KB Securities analyst Jeong Dong-ik said. 

Lee is undergoing two separate trials over suspected accounting fraud and stock price manipulation connected to a 2015 merger, and concerning his role in a bribery scandal that triggered the impeachment of former South Korean President Park Geun-hye.

His father Lee was the wealthiest stock owner in South Korea, with holdings including 4.18% of Samsung Electronics common shares and 0.08% of preferred shares, worth about 15 trillion won ($13.3 billion) in total.

He also held a 20.76% stake in Samsung Life worth about 2.6 trillion won, and a 2.88% stake in Samsung C&T worth about 564 billion won as of Friday's closing.

(Reporting by Joyce Lee and Hyunjoo Jin; Additional reporting by Heekyong Yang; Editing by Stephen Coates)

South Korea Samsung Lee Kun-hee Shares jump Chairman dies Inheritance tax Market reaction Chaebol