Lee Jae-yong’s business realignment

The Samsung Group combines Cheil Industries and Samsung C&T, which play key roles in the group’s ownership structure. Although Cheil Industries merges Samsung C&T, the name of the new entity will be Samsung C&T for the global brand awareness and the succession of the founder’s spirit. This deal practically concludes the group’s realignment following the merger of Cheil Industries and Samsung SDI, IPOs of Samsung SDS and Cheil Industries, and the sales of its affiliates in petrochemicals and defense industries.

This deal will realign the conglomerate into three groups: electronics centered on Samsung Electronics, finance focused on Samsung Life Insurance and construction and service covered by Samsung C&T which is engaged in construction, trade, fashion and resort. Cheil Industries was listed to the stock exchange at the end of last year and is increasing its global presence, while Samsung C&T has ample experiences in overseas projects and a strong network. Therefore, they can create synergy. It is also worth noting that whether the group will have a momentum in fostering the bio industry, an area where the group focuses for future growth.

The merger of Cheil Industries and Samsung C&T has a greater significance in that it strengthens the power of Samsung Group Vice Chairman Lee Jae-yong who took the helm after his father Lee Kun-hee collapsed in May last year. As Cheil Industries whose largest shareholder is Lee Jae-yong merges Samsung C&T, he will have increased influence over Samsung Electronics and Samsung Life Insurance, the group’s two key subsidiaries. The stock prices of Cheil Industries and Samsung C&T rose to the cap on the back of the expectations that the deal would stabilize the group’s leadership.

For the past one year, Lee Jae-yong practically served as an acting chairman of the group. He took over the position as the chairman of the board of director of the Samsung Life Public Welfare Foundation and the Samsung Foundation of Culture on May 15 and will be officially inaugurated on May 31. He will attend the Ho-Am award ceremony on June 1 on behalf of his father. He began to show his management style through the takeovers of foreign companies and the big deal between the Samsung Group and the Hanwha Group. Some say that Lee Jae-yong’s Samsung values practical interests more than causes and focuses on a few sectors instead of excessive diversification. However, if it is focused on short-term goals, it could weaken investments in areas with future growth potential. The business realignment such as the merger of Cheil Industries and Samsung C&T will be meaningful if it goes beyond Lee Jae-yong’s management control and increases the group’s global competitiveness.

The future of the Samsung Group, which represents the Korean business community, is related to the employees and their families of the group and its partner companies and even to the Korean economy. Lee Jae-yong who took control following his grandfather and father has heavy responsibilities. His another important task is increasing the transparency of the group as well as enhancing its competitiveness.