Samsung to sell its four operations to Hanwha

Samsung Group has decided to sell its four affiliates including a chemical and defense operation to the Hanwha Group, which will be the largest M&A deal since the 1998 Asian financial crisis. The decision is meaningful to Samsung Group in that it highlighted the rational leadership of Samsung Electronics Vice Chairman Lee Jae-yong in the long absence of his father, Samsung Electronics Chairman Lee Kun-hee. The deal would make Hanwha Group jump to the top in the relevant areas. Some in the business community see that it is only the beginning of a voluntary business restructuring by each conglomerate at a time when a long-term recession is likely to take place.

Hanwha Group signed a contract on Wednesday to acquire the control of Samsung Techwin and Samsung General Chemicals by purchasing their shares from Samsung Group. Hanwha Corp. will become the largest shareholder by taking over the entire shares held by Samsung Electronics and Samsung C&T (32.4 percent) at 840 billion won (758 million U.S. dollars). In addition, Hanwha Chemical and Hanwha Energy will acquire 57.6 percent of shares in Samsung General Chemicals (excluding treasury stocks) at 1.06 trillion won (956.6 million dollars). The deal also includes an option that Hanwha Group may pay 100 billion won (90.25 million dollars) to Samsung Group additionally depending on business results. As Samsung Techwin has a 50 percent share in Samsung Thales, Hanwha Corp. would have a joint control over it.

As a result, Hanwha Group has a control with an 81 percent of Samsung General Chemicals’ shares. As Samsung General Chemicals has a 50 percent share in Samsung Total, Hanwha will also have a joint control over Samsung Total. The two conglomerates will settle the price in the first half of next year and conclude the deal.

There are mixed views over the acquisition price. Based on the share price of Samsung Techwin, a listed company, Hanwha Group paid about 40 percent of premiums (about 340 billion won or 306.8 million dollars). “The value of Samsung General Chemicals alone is 2.6 trillion won (2.35 billion dollars) based on the price at the merger between Samsung General Chemicals and Samsung Petrochemical,” Kwon Sung-ryul, a researcher at Dongbu Securities, said in a research report. “If the shares of Samsung Techwin are included, two trillion won (1.81 billion dollars) is not large.”