Shares in groups tied to South Korean conglomerate Samsung jumped a day after the death of chairman Lee Kun-hee, as investors bet they would boost dividends to help his family members pay high inheritance taxes.
Lee, who passed away on Sunday, was the country’s richest person with stakes in Samsung units worth about Won18.2tn ($16.1bn) as of the end of last week. Lee Jae-yong, his son and vice-chairman of Samsung Electronics, has led the sprawling group for the past six years after his father suffered a heart attack.
South Korea’s inheritance taxes can reach as much as 65 per cent, among the highest in the world. That means the Lee family needs to cough up as much as Won10.6tn to inherit the former chairman’s assets and keep control of the nation’s biggest conglomerate. The sum can be paid in instalments over five years.
“Shares are rising as group units will probably pay higher dividends for the family’s inheritance tax payment,” said Park Ju-geun, head of research group CEO Score.
The Lee family has maintained control of the Samsung group through a complex web of cross-shareholdings across various business units. These include construction arm Samsung C&T, the group’s de facto holding company in which the junior Lee has a 17.3 per cent stake, and Samsung Electronics, the world’s largest maker of memory chips and smartphones.
Shares in Samsung C&T surged 21 per cent and Samsung Life, the conglomerate’s insurance unit, jumped 15.7 per cent on Monday on expectations of higher payouts. Shares of Samsung BioLogics, Samsung SDS and Samsung Engineering also gained ground.
Investors are also focused on a potential restructuring of the Samsung group and corporate governance reforms following the older Lee’s death. However, analysts are sceptical about whether these will happen soon with heir Lee Jae-yong mired in legal difficulties.
A case against the Samsung vice-chairman linked to allegations of a $3.9bn accounting fraud at the Samsung BioLogics unit began on Friday while a long-running court dispute related to the bribery of former president Park Geun-hye resumed on Monday.
Lee Jae-yong made a rare public apology in May for his legal troubles and pledged to not hand management of Samsung down to his children.
Experts believe the Lee family is unlikely to lose control of the conglomerate following the death of Lee Kun-hee.
“The family control will continue with no major changes in ownership structure for the time being,” said Chung Sun-seop, head of corporate analysis group Chaebul.com. “Selling their stakes without losing control won’t be easy because of the intertwined nature of their ownership structure.”