Samsung's market cap surges after merger deal

The market capitalization of Samsung Group, South Korea's No. 1 conglomerate, jumped two days after it announced a plan to merge two key affiliates, making the owner family richer, data showed Thursday.

In the latest in a series of mergers among group affiliates, Cheil Industries Inc., Samsung's de facto holding company, and Samsung C&T Co., its trading and construction arm, announced Tuesday that they will become one in September.

The total market value of listed firms affiliated with Samsung Group came in at 330.69 trillion won ($299.32 billion) as of Wednesday, adding 1.5 trillion won, or 0.5 percent, since Monday, according to the data compiled by corporate researcher FnGuide.

The weighting of Samsung Group shares in the main KOSPI market increased from 25.5 percent to 26.1 percent over the period, bucking the downturn trend of the broader market hit by growing speculation over a U.S. interest rate hike.

Cheil Industries shares jumped 16.5 percent in just two days to become the nation's fifth-largest company by market value on Wednesday, climbing up three steps. Samsung C&T stocks vaulted 18.8 percent to move up from 31st to 25th place.

Samsung SDS Co., a key IT service provider, also surged 13.6 percent to rise to seventh place from 12th.

The meteoric rise of Samsung shares came as the merger move was widely seen as part of groupwide efforts to speed up a power shift from group owner Lee Kun-hee to his only son, Jay-yong, vice chairman of flagship unit Samsung Electronics Co., as the senior Lee has been hospitalized since last May following a heart attack.

"Samsung Group shares are expected to rise whenever there are restructuring moves that raise expectations for the establishment of a holding company," Kim Hani, a researcher at Daishin Securities, said.

The merger is expected to consolidate Samsung's dominance in the top 10 rankings as the combined market value of the two firms to be merged now stands at 36 trillion won, which would make it the No. 2 company by assets next to Samsung Electronics Co., the group's crown jewel.

Market watchers say the owner family is the biggest beneficiary of the recent merger deal, questioning its potential impact on the group's corporate value.

"The decision to merge Cheil Industries and Samsung C&T is aimed at smoothing the third-generation power transfer and restructuring of the corporate governance, rather than reorganizing its business model," said Chung Sun-seop, CEO of Chaebul.com, which tracks the nation's conglomerates.

Following the merger announcement, the ailing chairman's three children got even richer as the value of their stakes in the key affiliates shot up.

Lee Jay-yong's stock assets increased 13.1 percent to 9.72 trillion won over the past two days. Shares of Lee Boo-jin, CEO of Hotel Shilla, and Lee Seo-hyun, chief of Cheil Industries, were estimated at nearly 3 trillion won, according to the data compiled by Chaebul.com.

The combined stock assets of the owner family, together with their parents, grew 6.7 percent to 29.29 trillion won over the period.

In contrast, Hyundai Motor Group struggled as the weak Japanese yen versus the Korean won sapped the leading Korean carmaker's competitiveness in the global market.

The combined market value of 11 listed firms affiliated with the world's fifth-largest automotive group was 105.73 trillion won as of Wednesday, declining 6.5 percent this year.

Hyundai Motor Co.'s market capitalization fell from 37.22 trillion won to 34.58 trillion won to become the nation's third-biggest firm by assets, behind chip giant SK hynix.

Kia Motors Corp., its sister company, and Hyundai Mobis Co., an auto parts maker, each fell 9.4 percent and 4.4 percent over the period. (Yonhap)