Samsung's Cheil doubles upon debut after $1.4 billion listing

By Reuters

Dec 17, 2014 09:47 PM EST

Shares in Cheil Industries Inc (028260.KS), the de facto holding company of Samsung Group, doubled on its debut on Thursday in the latest in a series of steps toward generational succession for South Korea's largest conglomerate.

Cheil is about 42 percent owned by Samsung Electronics Co Ltd (005930.KS) Chairman Lee Kun-hee and his three children, and is expected to be the main vehicle through which the family will keep control of the group.

With affiliate Samsung Card (029780.KS) having sold its entire stake in Cheil during the offering, a link in one of Samsung's circular cross-holding structures has been broken which will make it easier to divvy up the empire between the heirs, analysts said.

"There are a lot of scenarios about the final picture, but the owner family's stakes in Cheil are one of the few cards they can play to strengthen control in units such as Samsung Electronics. Cheil's value is expected to increase going forward," said Kim Joon-sop, analyst at E-Trade Korea Co, a securities brokerage.

The May heart attack and hospitalization of Lee Kun-hee is seen having added urgency to the process of transferring control to the next generation, with Samsung Electronics vice chairman Jay Y. Lee seen as his most likely successor as leader of the family business.

The debut gave a combined value of about 5.5 trillion won ($4.99 billion) for the stakes held by the three heirs - Jay Y. Lee and sisters Lee Boo-jin and Lee Seo-hyun.

Analysts have speculated that the children could sell some of their shares after the IPO to help pay for an inheritance tax bill estimated to be as high as $6 billion.

Besides the November listing of IT services affiliate Samsung SDS Co Ltd (018260.KS), which unlocked about $5 billion for the heirs, Samsung Group also sold its stakes in four defense and chemical affiliates to Hanwha Group.

It also mounted a failed attempt to merge Samsung Heavy Industries (010140.KS) and Samsung Engineering (028050.KS), and conducted various inter-group share sales, mergers and spin-offs.

Cheil Industries, which owns fashion brands and amusement parks, became the 14th most valuable company on the benchmark KOSPI .KS11 with a market capitalization of about 14.3 trillion won as of Thursday's opening.

Cheil opened trade at 106,000 won, compared with an IPO price of 53,000 won that came at the top end of its indicative range after raising 1.52 trillion won in South Korea's biggest IPO in four years.

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