* Samsung reviews fund proposals for new corporate structure
* Shares up 5 pct to new high; some investors voice support
* Move comes as Lee family negotiates leadership succession
* Elliott fought Samsung Group over merger of 2 arms in 2015
* Samsung still roiled by problems with Note 7 smartphone
(Adds link to graphic, closing share price in 4th paragraph)
By Se Young Lee
SEOUL, Oct 6 Samsung Electronics Co
shares jumped to a record high on Thursday after activist
investor Elliott Management submitted unsolicited proposals for
a radical corporate makeover at the world's biggest smartphone
An attempt by the U.S. hedge fund to wring change at South
Korea's biggest conglomerate last year failed in acrimony. But
investors and analysts said Elliott's latest move could open the
way for the founding Lee family to embrace change, cementing its
grip as it negotiates succession from its ailing patriarch to
the next generation and a hefty inheritance tax bill.
The approach on Wednesday by Elliott, which owns 0.62
percent of Samsung Electronics, came as the tech giant faced
fresh claims of problems with its flagship Note 7 smartphone,
with a report that a handset began smoking inside a U.S. plane
on Wednesday. Last month's global recall of 2.5 million devices
is set to show up in modest earnings growth guidance the firm is
expected to report on Friday.
Samsung said it will "carefully review" Elliott proposals
for splitting the firm into a holding vehicle for ownership
purposes and an operating company, as well as a 30 trillion won
($27 billion) dividend from its $70 billion cash pile. Shares
rose as much as 5 percent to a new record as other investors
voiced support before closing up 4.5 percent.
"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
The future of Samsung, including its succession plans, has
been a matter of intense scrutiny since group patriarch Lee
Kun-hee, now 74, was incapacitated by a heart attack in May
Though there have been numerous theories on how the Lee
heirs - Jay Y. Lee, 48, seen as the de facto leader of the
Samsung Group conglomerate, and his two sisters - will
ultimately secure control of Samsung Electronics, the group's
flagship company, the family has yet to publicly discuss its
Many analysts and investors believe Samsung Group will seek
a "de-merger" along the lines sought by Elliott in a way that
increases the Lees' direct control of the conglomerate's crown
jewel. The family members' combined stake in Samsung Electronics
is 4.9 percent, based on a Sept. 9 filing and the firm has a
market value of about $230 billion.
Samsung declined to comment on whether it was in direct
contact with $27 billion fund Elliott on the latter's approach.
Elliott on Wednesday said its proposal would allow the Lee
family to retain its control of Samsung Electronics and also
simplify the group's ownership structure.
Relations between Samsung and Elliott, founded by
billionaire Paul Singer, soured last year in a lengthy, bitter
feud over a merger of two Samsung affiliates. The deal, seen as
a stepping stone in the family succession plan, was opposed by
the fund as not offering investors full value but eventually
It was not immediately clear whether Elliott had already
begun communicating with other shareholders, but some Samsung
Electronics investors publicly backed the U.S. fund's push.
"We are supportive of restructuring and a higher dividend
payout to unlock the value in the business," Andrew Gillan, head
of Asia ex-Japan at Henderson Global Investors, told Reuters in
an email on Thursday. Henderson owns 0.12 percent of Samsung
Electronics, according to Thomson Reuters data.
Dutch pension fund APG Asset Management, which has a 0.8
percent stake, said it was positive about Elliott's proposals.
"Elliott is not making excessive demands. What they are saying
is in line with common sense," said Park Yoo-kyung, a Hong
Kong-based director specialising in corporate governance at the
Analysts said Elliott's proposals will likely lead to
further pressure from offshore investors for the conglomerate to
open up on its plans and make sure their interests are protected
in any further restructuring. Of Samsung Electronics' top 20
shareholders, a total of 11 are international investors,
according to Thomson Reuters data.
Meanwhile a spokeswoman for South Korea's National Pension
Service (NPS), the biggest investor in Samsung Electronics with
a 9.2 percent stake, said it was monitoring the situation, but
said it was too early to make comment. The NPS played a
significant role in the Samsung-Elliott spat last year, its
backing for the deal helping to secure its passage.
($1 = 1,109.9000 won)
(Additional reporting by Hyunjoo Jin, Christine Kim and Joyce
Lee in SEOUL and Nichola Saminather in SINGAPORE; Editing by