Samsung Electronics vice chairman and Samsung Group heir apparent Lee Jay-yong is expected to exert more influence throughout South Korea’s largest conglomerate following the merger between Cheil Industries and Samsung C&T.

Samsung said Tuesday it will be combining the two affiliates by Sept. 1 as part of its business restructuring aimed at creating a 60 trillion won ($54 billion) global enterprise by 2020.

With the merger, industry watchers said, the group’s leadership transition to a new generation has also been given a big boost.

As of last year, Lee was the largest shareholder of Cheil Industries, the de facto holding company of Samsung Group, with a 23.23 percent stake. But his stake in the group’s flagship Samsung Electronics still remained a tiny 0.57 percent.

Securing more control over the tech giant, which yields more than half the revenue of the Samsung empire, has long been considered crucial for his leadership succession.

As part of the efforts, the group has been revamping its businesses in recent years, more recently fueled by the hospitalization of his father and chairman Lee Kun-hee in May last year.

Over the past year, the group debuted Samsung SDS and Cheil Industries on the local bourse, while merging the material business division of Cheil Industries with Samsung SDI. It also sold off less profitable chemical and defense units to Hanwha Group in November.

During the process of streamlining its overlapping business areas, its owner family has cemented control over the group.


The latest merger between Cheil Industries and Samsung C&T, in particular, is expected to be a boon for Lee, considering Samsung C&T owns 4.1 percent and 17.1 percent stake in Samsung Electronics and Samsung SDS, respectively.

According to Samsung, the combined entity will use the Samsung C&T name and be the fifth-largest company in Korea by market capitalization. Lee’s stake in the company will stand at 16.5 percent, in comparison to the his aforementioned 23.23 percent stake in Cheil Industries.

“The merged company will play a key role in Samsung’s management restructuring,” said Park Joong-sun, an analyst at Kiwoom Securities. “It will help further expand the owner family’s grip on the overall Samsung Group.”

In line with the strategy, Lee also took over the helm of two group foundations ― Samsung Life Public Welfare Foundation and Samsung Foundation of Culture, which respectively own 2.18 percent and 4.68 percent stake in Samsung Life Insurance, on May 15.

The Samsung financial unit has a 7.6 percent stake in Samsung Electronics. It was also the first time that Lee has taken a chairmanship title within the group.

Industry watchers expect Samsung to attempt again to merge Samsung Heavy Industries and Samsung Engineering in the coming months, which failed last year due to resistance from shareholders.

By Lee Ji-yoon (jylee@heraldcorp.com)