SEOUL (AFP) – South Korea’s Samsung scrapped Wednesday a merger between two major units, citing the spiralling cost of buying back stock from shareholders opposed to the deal.
Samsung Heavy Industries – the world’s third largest shipmaker – and Samsung Engineering had announced the planned merger in September as part of a major restructuring to smooth a generational ownership succession.
Under the deal, the two firms were required to buy back shares from investors opposed to the merger.
The shipbuilding and engineering units were allowed to spend up to 950 billion won ($866 million) and 410 billion won respectively, for the share buyback. But the Samsung Engineering shares to be returned by unhappy shareholders were valued far above the limit at 706.3 billion won, the two units said in a joint statement.
“That means we have to shell out 1.62 trillion won to complete the merger, which will put great financial strain on the firms and eventually hurt our investors,” they said.
“We thus have decided to humbly accept the intention of our investors,” it said, adding the merger plan had “officially fallen apart”.
Samsung – the South’s top business group – comprises dozens of units including Samsung Electronics, the world’s top maker of mobile phones and TVs.