(Clarifies that CLSA is an investment bank, para 6)
By Lawrence White and Joyce Lee
HONG KONG/SEOUL, July 2 Investment bankers are
jostling to win plum roles from the founding Lee family of
Samsung Group, South Korea's top fee-payer, as it prepares to
hand the baton to the next generation in a restructuring that
could land more than $100 million in advisory fees alone.
Foreign and Korean investment banks are bringing in their
chief executives and top dealmakers to pitch for a glut of deals
as the $407 billion Samsung Group untangles an empire
that ranges from electronics to financial services.
Banks' top executives have long courted the Samsung Group as
it's among Asia's top fee-payers. Citigroup's chief
executive Mike Corbat flew to Korea last year to meet with
Samsung management, according to a source with direct knowledge
of the matter, while last month Asia-Pacific head Stephen Bird
travelled to Seoul.
A spokesman for Citigroup declined to comment.
Now, as the group's restructuring accelerates, Korean and
foreign investment banks are assembling large teams, sending
their CEOs to pay their dues at Samsung HQ and boosting research
coverage of the group to try and win lucrative work from the
"There are potentially hundreds of transactions that can be
done to simplify the Samsung group structure," said Shaun
Cochran, head of Korea at CLSA, an investment bank, which
published a 178-page report on the group on June 16.
As well as untangling the group's complex web of businesses,
the restructuring could also ease a potential $6 billion tax
bill faced by the Samsung heirs.
Unlike large Western companies that often retain a 'house'
bank, bankers say Samsung keeps them on their toes by fostering
competition for each and every deal as it believes it gets
better service that way.
Since 2010 the group has paid an estimated $167 million in
fees, the most among Korean corporates and the tenth-highest in
Asia outside Japan, according to data from Freeman Consulting.
So far this year, it has paid $21 million in fees, compared with
$13 million for all of 2013.
Bankers estimate Samsung could pay more than $100 million in
fees over the next two years.
With revenues from trading and dealmaking dwindling, global
banks in Asia have culled staff and focused on cross-selling to
the region's few serial fee payers.
That makes a group like Samsung, whose Samsung Electronics
Co Ltd is the world's biggest smartphone maker, a
top target for banks. In return, Samsung is a demanding client
even by investment banking standards.
"For a one hour meeting with them, we'll do thirty man-hours
of preparation so we don't waste their time," said a senior
executive at a foreign investment bank in Seoul
The sprawling Samsung conglomerate, whose 2012 revenues
accounted for more than a quarter of South Korea's nominal gross
domestic product, appears to be accelerating a restructuring
after patriarch Lee Kun-hee, 72, was hospitalized in May.
Last month, Samsung Everland Inc, a key holding company
within the group, announced plans for an IPO, following a
similar announcement in May by IT solutions unit Samsung SDS.
Other mandates include battery maker Samsung SDI Co's
acquisition of electronics materials affiliate Cheil Industries
Inc, and a potential renminbi-denominated bond
for Samsung Electronics. Banks are also pitching for at least
three sell-side mandates from Samsung, as it prepares to divest
non-core businesses, a person familiar with the process said.
The estimated $100 million payday for banks in the next two
years excludes fees from ancillary business such as providing
foreign exchange or hedging, which could push the total even
"Samsung's business style is 'we won't skimp on the payment,
let's make sure the work is right,'" said a Korean banker
working on one of the listings.
A spokesman for Samsung said in an emailed statement that
the group could not comment on fees or the details of its
subsidiaries' process of selecting banks.
NEED TO IMPRESS
Banks pitching Samsung must impress panels headed by
management of the group subsidiary doing a given deal, bankers
said. They must also woo Samsung heir apparent Jay Y Lee, who is
overseeing the restructuring and taking a keen interest on major
transactions such as the Everland IPO.
Banks working on the SDS IPO were not short-listed for the
Everland deal, sources with direct knowledge of the matter said,
as SDS officials did not want their bankers distracted.
Korean banks, unsurprisingly, have tended to win the lion's
share of the work in the past four years, with Samsung's own
securities arm earning 16 percent of all estimated fees.
Goldman Sachs has earned an estimated $19.1 million
in fees, or 11 percent of the total paid by the group since
2010, the most among foreign banks, according to Freeman
Consulting and Thomson Reuters data.
Other foreign banks on Samsung's books include Citigroup,
which provides cash management and foreign exchange services for
Samsung in some 67 countries, and JPMorgan Chase.
"Samsung are the epitome of Korea in how they handle banking
relationships - not looking to favour any firm outright,
spreading the wealth around, but laser-focused on quality of
execution," said a Seoul-based executive at a foreign bank.
(Reporting By Lawrence White in HONG KONG and Se Young Lee and
Joyce Lee in SEOUL; Editing by Denny Thomas, Rachel Armstrong
and Ron Popeski)