World’s Leading Smartphone Giant Samsung to be Divided Into Two?

By Ankita Kulkarni, | November 30, 2016

Samsung Electronics could be split into two corporate entities. (Maurizio Pesce/CC BY 2.0)

Samsung Electronics could be split into two corporate entities. (Maurizio Pesce/CC BY 2.0)

The leading global smartphone manufacturer Samsung Electronics will be split into two different organizations in accordance with a proposal by US hedge fund management firm Elliot Management. The firm, which holds 0.6 percent of Samsung's shares, submitted this proposal to the company's executive board of directors and they are currently reviewing it.

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In a bid to augment the profit earned by investors, Elliot Management proposed the idea of splitting the company into two where one organization would hold the ownership and act as a holding company while the other would purely be an operational company. This move would allow for a 75 percent free cash flow to investors in the company, according to the International Business Times.

According to Reuters, the 47-year-old company is still neutral about the proposal as it could shake up Samsung's position in the market. The company's board of directors are yet to come to a verdict on the proposed move. They are expected to review the proposal and come to a decision by the end of November.

Business analysts have said that splitting the company could be a good strategy considering the current inefficient cash management and poor corporate governance that exists in Samsung. It would strengthen the grip that the Lee family holds on the Korean firm. Jay Y. Lee, who took over as the head of two key foundations of Samsung following his father's death in May 2014, has been responsible for all the important business decisions for the company since the.

The head of Samsung's corporate governance David Smith expressed his dichotomy over the subject. He said that this would be beneficial to all the parties involved, and Elliot's proposals are difficult to argue with as it is always better to have a simpler organizational structure.

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