Will Samsung Shower Investors with Higher Dividends and Share Buybacks? A Standoff Looms.
A heated battle is brewing between Samsung C&T, the construction and energy arm of Samsung Group, and a group of activist investors. As the March 15 shareholders meeting approaches, demands for significantly higher dividends and a share buyback program are putting pressure on the company.
Investors Flex Muscles, Demanding Bigger Slice of Samsung C&T’s Pie
Activist Investors Seek Massive Dividends, Exceeding Samsung’s Proposal
Five foreign activist funds, including City of London Investment, have submitted a proposal demanding hefty dividends. They seek KRW 4,500 per common share and KRW 4,550 per preferred share, a staggering 75% higher than what Samsung C&T proposed. For context, the company planned KRW 2,550 and KRW 2,600, respectively.
Share Buyback Program Added to the Mix, Raising Eyebrows
But the demands don’t stop there. These investors are also pushing for a KRW 500 billion share buyback program, involving 3.86 million common shares at KRW 129,500 each. Combined with the dividend demands, this translates to a whopping KRW 1.23 trillion payout, exceeding Samsung C&T’s projected surplus cash flow for the next two years.
Samsung C&T Raises Concerns, Citing Potential Impact on Growth
Unsurprisingly, Samsung C&T expressed concerns. They argue that such a payout would hinder their ability to secure funds for future investments and growth initiatives. As an alternative, they proposed retiring over 7.8 million common shares and all outstanding preferred shares, already amounting to over KRW 1 trillion.
Will Investors Heed the Call? The Vote Holds the Key
With the shareholder meeting nearing, all eyes are on the voting outcome. While the activist group holds only a 1.46% stake, their demands have sparked debate. Ultimately, the decision rests with the majority of shareholders.
Key Takeaways
The proposed payouts exceed the company’s projected cash flow, raising concerns about future growth.
Samsung C&T counters with a stock retirement plan but urges shareholders to reject the activist proposals.
The March 15 meeting will determine the outcome of this tense standoff.
