* Samsung says doing review for optimal corporate structure
* Firm stresses it is "absolutely neutral" in deliberations
* Holding firm shift seen as next succession move
* Firm also boosting 2016 dividend, to buy back more shares
(Adds statement from Elliott affiliates, background, details)
By Se Young Lee
SEOUL, Nov 29 Tech giant Samsung Electronics Co
Ltd, under pressure from shareholders to improve
investor returns, said on Tuesday it will consider creating a
holding company in what would be the biggest shake-up in its
The move and a plan to raise dividends come after U.S. hedge
fund Elliott Management in October called for the South Korean
firm to split itself into a holding vehicle and an operating
However, the world's top maker of smartphones, memory chips
and televisions, said it was "absolutely neutral" about whether
to proceed and provided little detail on the potential
restructuring, underwhelming investors.
"The review does not indicate the management or the board's
intention one way or another," the company said in a statement,
adding it had hired external advisers for a review expected to
take at least six months.
Samsung's statement keeps the door open for Elliott to
continue its pressure on the company, which includes the hedge
fund's ability to nominate board directors at the next annual
Elliott, through its holding company affiliates, Blake
Capital and Potter Capital, called Samsung's plan a
"constructive initial step." But the $27 billion hedge fund also
signalled it wanted more.
"We anticipate more meaningful changes following the
company's corporate structure review," the Elliott affiliates
said in a statement on Tuesday.
The shareholder pressure on Samsung comes as the company
juggles a leadership succession and a major blow to its brand
after issuing an unprecedented recall of at least 2.5 million
Galaxy Note 7 smartphones in September.
Shares in Samsung, worth $224 billion combined, finished
unchanged on the day at 1.677 million won ($1,434) each. The
2016 dividend boost fell short of some expectations, while
uncertainty over the restructuring kept investors at bay,
"There is some disappointment that the dividend wasn't even
higher or possibly a special dividend, and this is the reason
for a flat share price today," said Sat Duhra, asset manager at
Henderson Global Investors.
Samsung did not directly mention Elliott in its statement,
but the Korean firm promised to respond to the fund's ideas by
the end of November.
Elliott, which launched its Samsung campaign last month,
owns 0.62 percent of Samsung's stock.
Samsung pledged to return 50 percent of free cash flow to
shareholders for 2016 and 2017, falling short of Elliott's call
for 75 percent to be returned and to pay a $26 billion special
Samsung rejected another Elliott proposal by saying that
even if it adopts a holding company, it has no plans at present
to merge that with Samsung C&T Corp, the group's
current de facto holding company and a firm that Elliott has
"I don't think Samsung said much that was surprising or
beyond what investors already had in mind," said HDC Asset
Management fund manager Park Jung-hoon.
Investors and analysts have long viewed a split for Samsung
Electronics as a way for the Lee family scion, Jay Y. Lee, and
his two sisters to boost their control of Samsung Group
They have said that Samsung shares trade at steep discounts
to global peers due to what they say is a complex ownership
structure, poor corporate governance and inefficient cash
management. The hope is that a major restructuring would address
those concerns and boost the company's value.
Samsung executives did not elaborate on the restructuring in
a conference call on Tuesday.
But under a restructuring, investors would expect the Lees
and affiliates in the Samsung group of companies to exchange
their operating company shares for stock in the holding firm,
strengthening their grip.
Samsung Electronics would then return more capital to
shareholders, investors say. Such a move would boost earnings
for Samsung Group firms and the Lee heirs, who face a
multi-billion dollar inheritance tax in the event that
74-year-old Samsung Group patriarch Lee Kun-hee dies. The senior
Lee has been in hospital since May 2014 following a heart
Henderson's Duhra said the asset manager would be satisfied
with a restructuring if it addresses "decades of inefficient
structures, poor governance and weak corporate behaviour towards
Samsung said it would increase dividends for 2016 by 36
percent to 28,500 won ($24.36) per share, and buy back and
cancel additional shares in January 2017 with whatever excess
free cash remains from 2016.
The company also said it needed to maintain a net cash
position of between 65 trillion won and 70 trillion won,
suggesting it is not likely to pay the special dividend sought
(Additional reporting by Michael Flaherty in NEW YORK; Nichola
Saminather and Anshuman Daga in SINGAPORE; Editing by Miyoung
Kim, Stephen Coates and Paul Simao)