Samsung C&T Cancels All Treasury Shares...Increase in Share Value

[Asia Economy Reporter Park Sun-mi] 'Written as "Enhancing shareholder value," but read as "Benefiting the controlling family."

When the largest shareholder of a company is the controlling family, the biggest beneficiary of shareholder return policies aimed at enhancing shareholder value is the controlling family. This is a natural fact. Korean listed companies, often criticized for being "reluctant to return profits to shareholders," sometimes face unfavorable views that decisions to increase shareholder value are actually intended to "enrich the pockets of the largest shareholders." Samsung C&T, whose stock price has been rising continuously due to treasury stock cancellation, is a representative example.

Samsung C&T has decided to cancel all of its treasury shares in installments over the next five years to enhance corporate value. The treasury shares held by Samsung C&T amount to 24,718,099 common shares (13.2%) and 159,835 preferred shares (9.8%), with a market value of approximately 3 trillion KRW. Treasury stock cancellation is considered a representative shareholder return policy because it reduces the number of issued shares, thereby increasing the value of each share. Along with the treasury stock cancellation, Samsung C&T will maintain a dividend policy until 2025, distributing 60-70% of dividend income from affiliates annually for three years. After deducting dividend processing costs, this essentially means distributing almost all dividend income from affiliates to shareholders. The minimum dividend per share is 2,000 KRW.

Samsung C&T’s shareholder return policy was immediately reflected in its stock price. The stock price, which was 111,300 KRW on the 15th, rose intraday to 119,000 KRW after the announcement of the shareholder return policy on the 16th and closed at 115,500 KRW, up 3.77%. On the 17th, it closed at 116,100 KRW, up 0.52%. The value of the controlling family’s shares also rose accordingly.

Currently, Samsung C&T’s largest shareholder is Lee Jae-yong, Chairman of Samsung Electronics, holding 33,880,000 shares (18.13%). Lee Boo-jin, President of Hotel Shilla, holds 11,662,168 shares (6.24%), Lee Seo-hyun, Chairwoman of Samsung Welfare Foundation, holds 11,662,168 shares (6.24%), Hong Ra-hee, former director of Leeum Museum, holds 1,808,577 shares (0.97%), and Lee Yu-jeong, eldest daughter of the late Lee Byung-chul, the founder’s fourth daughter Deok-hee, holds 600,000 shares (0.32%). The total controlling family shareholding amounts to 31.9%. If all treasury shares are canceled, the controlling family’s stake will increase by about 5.1 percentage points.

Maintaining the existing dividend policy also benefits the controlling family. Samsung C&T uses operating income for investments and other operational funds and utilizes dividend income for shareholder returns. Samsung C&T currently holds stakes in Samsung Electronics, Samsung Life Insurance, Samsung SDS, etc., from which it receives dividend income. As Samsung affiliates are expanding shareholder return policies through dividends, an increase in dividends can be expected. Moreover, if Biologics, in which Samsung C&T holds a 43.44% stake, introduces a dividend policy around 2025, the dividends receivable by the controlling family will increase further.

Chairman Lee and his family, who are facing the third installment of inheritance tax payment in April, need stable dividend income until 2026 when the 12 trillion KRW inheritance tax installment payments end. Considering stock-backed loans for inheritance tax payments, the higher the stock price of Samsung C&T, which serves as collateral, the more money they can borrow.

Kim Dong-yang, a researcher at NH Investment & Securities, said, "The total annual shareholder return amount of Samsung C&T over the next three years is about 1 trillion KRW, including approximately 400 billion KRW in dividends and 600 billion KRW in treasury stock cancellation, which corresponds to 4.8% of the market capitalization." He added, "Theoretically, to maintain the current price discount relative to net asset value (NAV), the stock price needs to rise to 122,000 KRW."

This content was produced with the assistance of AI translation services.