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[ELLIOTT ACTIVISM] Lee jae-yong's Samsung C&T stock value surges 50%

[THE INVESTOR] Tech giant Samsung Electronics Vice Chairman Lee Jae-yong seems to be the biggest beneficiary of the rumored merger between the tech giant and construction and trading firm Samsung C&T as his stocks in the latter have increased nearly 50 percent in value over four months.

Lee, the largest shareholder of the C&T with 17.23 percent, or 32,674,500 shares, of the construction and trading firm, saw his stock value in the company rise 46.4 percent from 3.66 trillion won(US$3.29 billion) on June 2 to 5.36 trillion won on Oct. 6, based on the closing price of the stock, at 112,000 won and 164,000 won, on the respective dates.

Samsung Electronics Chairman Lee Kun-hee (left) and his son, Vice Chairman Lee Jae-yong
Samsung Electronics Chairman Lee Kun-hee (left) and his son, Vice Chairman Lee Jae-yong

In a letter to Samsung Electronics on Oct. 5, hedge fund Elliott Management requested the tech giant to split into two -- holding and operating companies.

The suggested split-off scheme, aimed at streamlining the complex ownership structure of the tech firm and Samsung Group as a whole, has long been speculated among market analysts.

In response to Elliott’s demand, Samsung said it would “carefully consider a shareholder’s request,” which has been perceived as a positive signal.

After the split-off, market watchers forecast that the holding company would merge with Samsung C&T, which sits atop the labyrinthine management structure of Samsung Group.

On the expectations of the alleged merger scheme, the construction business arm of Samsung Group saw its shares increase 7.89 percent on Oct. 6 and Samsung Electronics’ shares rose 4.45 percent on the day.

Lee’s younger sisters Boo-jin and Seo-hyun hold 5.51 percent shares of the construction and trading firm each, currently valued at 1.71 trillion won.

Samsung Group Chairman Lee Kun hee’s stock value in C&T stands at 889.8 billion won.

Some argued the recent demand of Elliott could actually be aimed at helping Samsung Electronics to speed up its business restructuring efforts, which are in line with Samsung Group’s push for generational transition from ailing Chairman Lee Kun-hee to his son.

By Kim Young-won (