SEOUL: Samsung Electronics Co Ltd yesterday announced a US$2 billion (RM6.7 billion) share buyback plan, its first since 2007, following investor calls for higher returns against a backdrop of rapidly declining profits.
The world’s largest smartphone maker will buy back 1.65 million common shares and 250,000 preferred shares to stabilise its share price and boost value for shareholders, it said in a regulatory filing, its second-largest buyback ever.
The buyback is the latest by a major South Korean company following similar action earlier this month by Hyundai Motor Co and affiliate Kia Motors Corp, whose buyback plans were likewise aimed at enhancing shareholder value.
Samsung’s plan comes amid mounting
pressure for the tech giant to return more capital to shareholders as it heads for its
worst annual profit in three years, dragged down by falling market share in its smartphone business.
Samsung shares are down 12.5 per cent this year, having recovered from multi-year lows seen last month, compared with a 1.5 per cent decline for the broader market.
The company is also expected to increase dividend payouts this year to further boost investor sentiment, though Samsung has yet to specify plans.
The buyback plan comes ahead of Samsung’s annual personnel appointment announcement, which is expected next month.
Its poor mobile phone performance this year has led to speculation that major changes may be coming, including the potential dismissal of the company’s mobile division chief J.K. Shin.
Meanwhile, Samsung is selling stakes in four chemical and defence firms for 1.9 trillion won (RM5.8 trillion) to Hanwha Group, the latest move in the massive task of restructuring the conglomerate.
Samsung is reorganising its business empire to make it easier for the children of Samsung Electronics Co Ltd chairman Lee Kun-hee, 72, who has been hospitalised since a May heart attack, to divvy up the conglomerate.
This has included stake transfers between Samsung units intended to narrow the sprawling group’s focus.
The heirs are also trying to find ways to pay an estimated six trillion won inheritance tax bill. The listing of Samsung SDS Co and the upcoming initial public offering of Cheil Industries Inc will provide greater financial flexibility to manage that process.
“Samsung under chairman Lee Kun-hee’s leadership expanded into a wide range of businesses, but it looks like (heir apparent) Jay Y. Lee is now looking to move in the other direction,” said Chung Sun-sup, CEO of research firm Chaebul.com.
Some analysts say the elder Lee’s illness may have accelerated preparations by his son and his two daughters to ensure a smooth transfer of control to the next generation.
The four companies being sold down in the latest moves are not seen as central to the succession process, and the younger Lees will see little direct financial benefit, analysts said. Reuters