The stock market went frantic. Business analysts were excited. News of the merger between Cheil Industries and Samsung C&T ― two main pillars of Samsung Group ― revved up the business industry throughout last week.
But as time passed, the victor of the very unusual marriage between a fashion-chemical company and construction-trading firm became very clear. According to news reports, Samsung Group vice chairman Lee Jay-yong saw his wealth increase by around 1 trillion won ($897 million) within a week, given his 23.23 percent stake in Cheil Industries.
Apart from pocketing that jaw-dropping amount of money, the 46-year-old took a step closer to inheriting the $529.5 billion business empire from his father and Samsung chairman Lee Kun-hee who fell critically ill in May 2014.
Though long named the Samsung crown prince, junior Lee had little foothold inside the company: His stake in the group’s flagship Samsung Electronics was a tiny 0.57 percent. In order to get anointed, it was imperative that he strengthen his grip on Samsung Electronics, which yields more than half of the entire group’s revenue.
And merging Samsung C&T ― which owns 4.1 percent of Samsung Electronics and 17.1 percent of Samsung SDS ― with Cheil Industries ― nearly a quarter owned by him ― Lee will get a shortcut to the control tower of the flagship company.
At the new Samsung C&T ― the name that will be retained by the merged entity ― Lee’s stake will stand at 16.5 percent, compared to his 23.23 percent stake in Cheil Industries. However, the number of shares is very large and hard to reach for other people, securing his dominant position in the group, observers say.
“Whether Lee Kun-hee recovers or not, it is quite evident that Jay-yong will replace his father at the management,” a business analyst said.
Known as rather shy but friendly ― some reporters attest that Lee would put his arms around them and talk in a casual manner ― and less authoritative, he has built a good reputation within the group.
But it doesn’t mean that he will be a good manager, some say.
“Jay-yong has a lot to prove. His grandfather and Samsung founder Lee Byung-chull had great eyes on the future and pushed semiconductors as the company’s next growth engine in the 1980s. Lee Byung-chull’s son Kun-hee knew where the wind was blowing. He was also a very charismatic person and made Samsung the Samsung you see,” an insider said.
“It must be quite a challenge for the third-generation successor to emulate such success. The business environment is getting tougher,” he added.
The fact that the National Pension Service, the largest shareholder of Samsung C&T, may veto the merger is also a big threat. The NPS recently refused the merger of Samsung Engineering and Samsung Heavy Industries, which had to be nullified.
Sibling rivalry?
One of the ways to show his managerial talent will be to outpace the success of his younger sisters ― Shilla Hotel CEO Lee Boo-jin and Cheil Industries’ fashion division president Lee Seo-hyun.
Boo-jin and Seo-hyun also hold 7.74 percent of Cheil Industries each and reportedly saw their wealth swell by 500 billion won through the recent merger news.
Having grown up in the rather liberal and competitive family, the two have also been actively participating in the family business. Hotel Shilla reported record-breaking sales last year and Cheil’s fashion unit also showed gradual success through the launch of low-end brands.
Boo-jin, known as a cool-headed but determined leader, was often introduced as Kun-hee’s favorite by the media. She had once served as a senior executive of Samsung C&T and the CEO of Everland ― which is now a part of Cheil Industries. Media reports noted that there is the slightest possibility that Boo-jin may take over Samsung Group and that she is not “uninterested.”
“At this point, it is quite certain that Jay-yong will take over the group. But praise for his sisters will always be a challenge,” a pundit said.
So, the question lingers: If the big brother finally takes the helm, what will become of the sisters?
Rumors have swirled that Boo-jin will join Samsung C&T to take over the leisure division that was previously part of Everland. Some other rumormongers say that Seo-hyun, who has long led Cheil’s fashion and advertisement agency units, is likely to lead half of Samsung C&T.
Another emerging prediction is that both the sisters are likely to split from the Samsung empire.
Chaebol sisters have gone separate ways in the past.
In 1991, Lee Kun-hee’s elder sister Lee In-hee split Samsung’s home furnishing unit and established Hansol Group. Their younger sister Myeong-hee established Shinsegae Group with Samsung’s retail arm in 1997.
“Will the sisters part ways with their older brother? Perhaps one day,” an onlooker said, citing the aforementioned cases.
“But I think they will remain under the Samsung umbrella until they prove that they have the capability to lead a business enterprise without the Samsung brand name,” he added.
Local news outlets reported that their mother Hong Ra-hee will play a key part in the final inheritance structure. Business Post reported that she has been leading the family and is hands-on with the governance structure since her husband fell ill.
“According to the law, Hong will inherit 66 percent of Lee Kun-hee’s wealth. Who she will support and what she has in mind will be crucial for the future of the Lee clan,” business pundit Lee Jung-hwan was quoted as saying by OhMyNews.
By Bae Ji-sook (baejisook@heraldcorp.com)
