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| Cheil Industries co-CEO Yoon Jo-hwa, right, checks stock charts of Cheil Industries with co-CEO Kim Bong-young, center, and Korea Exchange President Choi Kyung-soo in a ceremony to make the firm's listing at the Korea Exchange in Seoul, Thursday. / Yonhap |
By Kim Yoo-chul
Cheil Industries, Samsung Group's de facto holding company, made a successful debut on the stock market Thursday, with its shares closing way above the initial public offering price.
The company's listing on the bourse is expected to give fresh momentum to Samsung Group's restructuring into a holding firm system, Samsung officials and analysts said.
"Samsung Group is expected to adopt a holding company system next year, with Cheil Industries at the center of the reorganized group. Given this, Cheil has strong upward potential," said HMC Securities analyst Kim Young-woo in a note to clients.
Cheil Industries opened at 106,000 won, up from the 53,000 won IPO price, and closed at 113,000 won, up 6.6 percent.
Kim at HMC expects Cheil Industries "to assume a significant role" in the conglomerate's plan to launch a new holding system.
Analysts said that Samsung Group heir Lee Jae-yong, and his two sisters Lee Boo-jin and Lee Seo-hyun are major shareholders of the de-facto holding company.
"That's why Cheil Industries will be the key vehicle for a power succession," Kim said.
Samsung Electronics Vice Chairman Lee Jae-yong and Samsung Chairman Lee Kun-hee's two daughters hold a combined 45.6 percent stakes on Cheil Industries.
The vice chairman Lee is the biggest shareholder of Cheil with 25.10 percent, while his stake in Samsung Electronics is just 0.57 percent.
The IPO has added more than 6 trillion won in wealth to chairman Lee's three children with the vice chairman Lee having the most at 3.32 trillion won, followed by Boo-jin and Seo-hyun with 1.10 trillion won each.
The Cheil IPO is part of a restructuring by the family that controls the nation's most-powerful conglomerate. Taking Cheil public is a step toward helping the junior Lee be ready to take the helm of Samsung after his father.
Chairman Lee Kun-hee still remains hospitalized in a hospital after suffering a stroke in May.
Samsung Group has denied market speculation that it will adopt a holding company system, but analysts are betting that the group will eventually be restructured into the system.
"Samsung Electronics will be split into two units ― an investment company and holding company ― and Cheil may acquire Samsung's holding unit to create a holding company. This is a scenario that has been reviewed by Samsung's top management," said one official.
To entirely take control of Samsung, the chairman's three heirs will have to pay as much as $5 billion won in inheritance taxes on the chairman's estimated $12.7 billion fortune.
Officials say the heirs now secured sufficient funds thanks to successful IPOs of Cheil Industries and Samsung SDS.
Samsung Group is simplifying its cross-unit shareholdings that will allow the Lee family to control about 70 affiliates with less than a 2 percent total stake.
Samsung recently handed over its chemicals and defense units to Hanwha Group, a move aimed at streamlining portfolios ahead of the opening of new management era.
Vice Chairman Lee currently cannot sell his Samsung SDS shares due to a lock-up period, and won't be able to sell Cheil Industries shares either for a while.
Analysts say that it's highly likely that the power shift will gain faster momentum in the latter half of next year.
"Cheil Industries may be overvalued on expectations of the unit's increased role inside Samsung. But this has already been factored into share prices," said KTB Investment Securities analyst Oh Jin-won.
