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| Renault Samsung Motors headquarters and its single assembly line in Busan, the southeastern region of the peninsula / Courtesy of Renault Samsung Motors |
By Kim Yoo-chul
A few days after the release of Samsung Electronics Vice Chairman Lee Jae-yong from prison on parole, Samsung decided to end its 26-year auto venture with Renault.
In a regulatory filing to the Korea Exchange (KRX), Thursday, Samsung Card said the Samsung Group's card issuance affiliate is on track to sell off stake it owns in Renault Samsung Motors.
"Samsung Card is in the process of selling the company-owned 19.9 percent stake in Renault Samsung Motor. But other specifics such as the type of stake sale and form of due process have yet to be decided," it said in the filing. Samsung Card is the second-largest shareholder in Renault Samsung Motors, a joint venture with Renault Group.
Samsung Card shares remained nearly flat ending at 33,900 won, down 0.15 percent, Thursday, data provided by KRX said.
Local investment banking industry sources said Samsung Card sent out invitations for a tender to private equity funds (PEFs) and various other financial investors at both home and aboard.
Samsung's exit from the venture has widely been expected as Samsung Card decided not to renew its trademark contract with Renault, which expired last year. The expiration mandates Renault Samsung Motors remove "Samsung" from the venture's name after a two-year grace period in September 2022. Renault Group had been paying between 40 billion won and 50 billion won to Samsung each year.
Despite Samsung Card's clarification for its planned stake sale, the sale process is unlikely to go smoothly as Renault Samsung Motors isn't in good shape both in terms of its financial soundness and corporate sustainability. It reported a 79.6 billion won operating loss last year, the first such loss in eight years.
Plus, it had launched massive voluntary retirement programs for employees to save fixed costs amid falling sales and deteriorating profit. Renault Samsung Motors is the only vehicle manufacturer in Korea which has yet to finalize negotiation with its workers' union regarding employee benefits and wage-related issues, last year not this year.
Some say the central point behind the Samsung Card's decision is due to its pessimism for the venture's future sustainability amid the global vehicle industry's rapid transition toward electric vehicles. Given its limited product portfolios, it's unlikely the venture's top shareholder, Renault Group, will move forward towards its possible initial public offering (IPO).
"The sale price won't be high," said one source. Samsung entered into the finished vehicle business back in 1995. However, after the Asian Financial Crisis, Renault Group acquired a controlling stake in it and since then Samsung has only been collecting dividend and trademark royalties without involvement in the management of the venture.
