Samsung’s cross-shareholding investments decline

The number of cross-shareholding investments among affiliates of Samsung Group has decreased thanks to a recent series of shifts in its governance including the listings of key affiliates such as Cheil Industries Co. on the Seoul bourse, a market researcher said Sunday.

According to a report from Chaebol.com, Samsung’s cross shareholding investment rings that connect its affiliates fell to 10 this year from 30 a year ago.

Cross shareholding is a type of investment structure among affiliates of a business group in which company A holds a stake in company B, which owns a stake in company C, which holds a stake in company A.

The circular investment structure has been criticized for allowing idle assets to increase managerial control of affiliates and avoid investment.

Of 30 circular investment rings of Samsung, 10 were removed due to the merger of Samsung SDI Co., the world’s top maker of TV displays and smartphone batteries, and Cheil Industries, which produces electronics and chemical materials. Six were undone when Samsung Life Insurance Co. sold its stake in Samsung C&T Corp., a trading and construction company. Seven were removed when Samsung Card Co. disposed of its stake in Cheil Industries.

However, three new rings were formed by Samsung Fire & Marine Co. buying a stake in Samsung C&T held by Samsung Life Insurance.

Market watchers expect Samsung Group to speed up its reorganization of its governance structure, such as by dismantling investment ties between its financial and non-financial affiliates, which is limited by law.

Samsung Group has been reorganizing its governance structure since May when its chairman Lee Kun-hee was taken to hospital after suffering a heart attack. The reorganization has been seen as part of moves to pass the group’s managerial rights on to heir apparent Lee Jay-yong. (Yonhap)