SEOUL • South Korea's Samsung Electronics yesterday said it will increase dividends and consider splitting itself, as the tech giant faces possibly the biggest structural change in its 47-year history.
But the world's top maker of smartphones, memory chips and TVs said it was "absolutely neutral" about whether to proceed, and provided little detail on the potential restructuring, underwhelming investors and keeping shares flat.
"The review does not indicate the management or the board's intention one way or another," the company said in a statement, adding that it has hired external advisers for a review that is expected to take at least six months.
The move comes after US activist hedge fund Elliott Management last month called for Samsung to split itself into a holding vehicle for ownership purposes and an operating company as well as boost shareholder returns.
Samsung did not directly address Elliott's proposals yesterday.
The company pledged to return 50 per cent of free cash flow for 2016 and 2017, versus Elliott's call for up to 75 per cent to be returned on top of a US$26 billion (S$37 billion) special dividend.
Samsung also said it was not considering merging its owner vehicle with Samsung C&T Corp, Samsung Group's de facto holding company, even if it were to move to a holding company structure, rejecting another Elliott proposal.
Investors and analysts have long viewed a split for Samsung Electronics as a way for Lee family scion Jay Lee and his two sisters to boost their control of South Korea's top conglomerate, the Samsung Group.
Investors believe the Lees and Samsung Group affiliates will exchange their operating company shares for stock in the holding firm, strengthening their grip.
Samsung Electronics would then return more capital to shareholders, investors say. This would boost earnings for Samsung Group firms and the Lee heirs, who face a multi- billion dollar inheritance tax when the 74-year-old Samsung Group patriarch Lee Kun Hee passes away. He has been in hospital since May 2014 after suffering a heart attack.
Investors say Samsung shares trade at steep discounts to global peers due to its complex ownership structure, poor corporate governance and inefficient cash management. The hope is that a major restructuring would address those concerns and boost the firm's value.
In another nod to investors, Samsung said it would raise dividends for this year by 36 per cent to 28,500 won per share, and buy back and cancel additional shares next January with whatever excess free cash remains from 2016.
The firm also said it needed to maintain a net cash position of between 65 trillion won and 70 trillion won, suggesting it is not likely to pay the 30 trillion won special dividend sought by Elliott.