Attention on Securing 10 Trillion Won Inheritance Tax Funds... Will Samsung Affiliates Increase Dividends?

Samsung C&T, Samsung Life, Samsung SDS... Surge Over 10% Intraday
Considering Possible Governance Changes... Samsung Electronics Expected to Strengthen Shareholder Return Policy

[Asia Economy Reporter Oh Ju-yeon] Since the news of the passing of Samsung Chairman Lee Kun-hee on the 25th, the market has been focusing on potential changes in Samsung Group's future governance structure and methods to secure the inheritance tax funds amounting to around 10 trillion won. On a broad scale, it is judged that the restructuring of Samsung Group's governance has already been completed, making it unlikely to burden the current Vice Chairman Lee Jae-yong's administration. On the 26th, Samsung Electronics showed less than a 1% increase, showing little fluctuation. However, among affiliates, the possibility of increased dividends to secure inheritance tax funds stood out, causing some stocks to surge more than 10% during the trading session.

On that day, Samsung C&T, Samsung Life Insurance, and Samsung SDS saw their stock prices soar vertically at the opening due to the highlighted possibility of dividend increases. It is interpreted that the stock prices of related affiliates jumped sharply as there were speculations that the family, including Vice Chairman Lee, might increase dividends from affiliates to prepare for the trillion-won scale inheritance tax.

As of 9:46 a.m., Samsung SDS recorded 184,000 won, up 6.67% from the previous trading day. During the session, it rose as much as 10.14% to 190,000 won, breaking past the previous high range.

Samsung Life Insurance also traded at 68,000 won, up 7.77% from the previous day. It started rising steeply right after the opening and traded as high as 73,000 won, up 15.69%, during the session.

However, some speculate that Samsung Life Insurance and Samsung SDS, which are not expected to affect management stability, might see share disposals, causing the momentum of stock price increases to somewhat slow down.

Kim Dong-yang, an analyst at NH Investment & Securities, said, "With the continuous rise in Samsung Electronics' stock price, the inheritance tax burden has also increased, and now it has become difficult to immediately secure inheritance tax regardless of how the shares are divided and inherited. Ultimately, among the third-generation controlling shareholders' holdings and inherited shares, Samsung Life Insurance and Samsung SDS, excluding Samsung Electronics and Samsung C&T which are meaningful in terms of 'dividend income scale' and 'maintaining Samsung Group's control,' are inevitably subject to disposal," he predicted.

On the other hand, regarding Samsung C&T, although various ideas related to governance restructuring are emerging, it is analyzed that no decision that would damage corporate value will be made since Vice Chairman Lee holds a 17.3% stake, making him the largest shareholder.

Jung Dong-ik, an analyst at KB Securities, said, "Considering that the heirs have to pay the inheritance tax of around 10 trillion won in installments, the possibility of future dividend increases is also judged to be high," adding, "Whatever form the changes take, it will be positive for Samsung C&T shareholders."

In line with these expectations, Samsung C&T's stock price was trading at 124,000 won, up 19.23% from the previous day at this time. Samsung C&T opened the day at 120,500 won, up 15.87%, and surged as much as 21.15% during the session.

Meanwhile, the value of listed shares held by the late Samsung Chairman Lee Kun-hee is estimated at about 18.22 trillion won, and considering the inheritance tax rate based on the shareholding ratio, the inheritance tax is estimated to reach 10.93 trillion won. Since the inheritance value is calculated based on the average stock price two months before and after the death, the exact calculation of the inheritance value will be determined two months later.

The securities industry expects that the first inheritance tax can be prepared through Chairman Lee's retirement pay and cash holdings, and subsequent inheritance taxes will likely be covered by dividends from major companies held by Vice Chairman Lee and stock-backed loans on inherited shares.