Samsung SDS prices IPO at top of range

Samsung priced one public offering and launched a second one on Friday as the sprawling Korean group moved ahead with its succession-linked restructuring in the two biggest share sales in Seoul in more than three years.

Samsung SDS, the group's IT services unit, on Friday priced its shares at Won 190,000 each - the top of its price range - raising $1.1bn. Meanwhile Cheil Industries, the linchpin of the Lee family's control of the 80-plus companies in the group, filed plans to raise between Won1.3tn ($1.2bn) and Won1.5tn for a fifth of the recently enlarged company.

While Samsung SDS says that it is floating to further its international expansion strategy, analysts view the move as part of a broader restructuring of the Samsung Group that will transfer control to the next generation of the founding Lee family.

Many analysts and investors are speculating about a major overhaul of the complex circular shareholding structure that binds together the dozens of companies constituting Samsung Group, which enables the founding family to retain control over strategy despite holding only a small portion of the companies' equity.

The Samsung SDS offer attracted heavy interest, with demand for the $270m allotted to international investors reaching almost 50 times the amount available. Just over half the total deal was available to institutional investors, and fund managers in Korea also asked for far more than they were given.

Investors were attracted by the combination of the offering's rare size in the Korean market, the Samsung name and the company's expected inclusion in Seoul's benchmark index, according to people close to the deal.

Bankers for Cheil Industries will next week begin talking with investors about that group's offering, which if all goes to plan, will price early in December.

Cheil's operations include theme parks and fashion, and it was until this year named Samsung Everland. The Lee family holds a 46 per cent stake in Cheil Industries, which has a large stake in Samsung Life Insurance, the biggest shareholder in group flagship Samsung Electronics.

"Its an important transaction for Korea and for the Samsung group," said one person familiar with the deal, who declined to speculate whether it would attract similarly high demand as Samsung SDS.

With Samsung Electronics chairman Lee Kun-hee hospitalised since a heart attack in April, attention has focused on how his heirs will cope with an inheritance tax obligation likely to exceed $4bn.

Lee Jae-yong, the Samsung Electronics vice-chairman who is Lee Kun-hee's only son and presumed heir, owns more than 11 per cent of Samsung SDS which is worth $1.5bn after Friday's deal. Other major shareholders in Samsung SDS include Samsung Electronics and the construction group Samsung C & T.

Analysts at CLSA expect Samsung Group to be reorganised into a new, simpler structure involving three holding companies, each controlled by the Lee family. While this would mean the persistence of family control, investors broadly welcome such a prospect.

"The holding company system has better transparency," said Lee Wonil, founder of the activist hedge fund Zebra Investment Management.

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