Samsung to merge two major units in $8.1 bn deal

Samsung Group today said that it would merge two of its major units in an $8.1-billion all-share deal, as part of the South Korean conglomerate's restructuring plan, which sees the control of the group passing on to a new generation of the founding Lee family.

Samsung Group Hheadquarter Bbuilding, SeoulUnder the all stock deal approved by the boards of both companies, Cheil Industries, a fashion, leisure and construction company in which the Lee family holds 42 per cent, will acquire the construction and engineering affiliate Samsung C&T.

The merger will see Cheil offer 0.35 new shares for each Samsung C&T share and is expected to close by September subject to shareholder approval. That deal is valued at 8.9 trillion won ($8.1bn), based on Cheil's today opening price.

Cheil has a market cap of 22 trillion won ($2 billion) and Samsung C&T 8.6 trillion won as of today morning.

The merged company, to be called Samsung C&T, will target annual sales of about 60 trillion won in 2020, compared to their combined sales of 34 trillion won in 2014, Samsung said in a statement.

Samsung Group's patriarch Lee Kun-hee has designated his son Lee Jae-yong as the heir to the empire and is the biggest shareholder in Cheil with 23 per cent.

The combination is expected to give the merged entity the largest stake in Samsung BioLogics Co, the biopharmaceutical arm, as Cheil and Samsung C&T hold 46.3 per cent and 4.9 per cent, respectively.

Samsung C&T also holds 17.1 per cent in Samsung SDS Co., 12.6-per cent in Cheil Worldwide Inc. and 7.8 per cent in Samsung Engineering.

Cheil is a real estate developer and theme park company, whose business portfolio includes construction, fashion, resorts, and catering, while Samsung C&T is into construction, electronics, chemicals, finance and several other fields.

"The two companies expect to create synergy by combining their construction businesses, while Samsung C&T`s global network will help develop new opportunities overseas for Cheil`s fashion, resort and catering businesses," Samsung said in a statement.