SEOUL Samsung Everland Inc, a key holding firm within the sprawling Samsung Group, said it is planning an IPO - a move that could help heirs in the family-run conglomerate restructure the group and give them more leeway to pay potential inheritance taxes.
Questions about the South Korean conglomerate's future have intensified since 72-year old patriarch Lee Kun-hee was hospitalized following a heart attack in May - an event that appears to have speeded up steps to hand over the reins to his son and unofficial heir apparent Jay Y. Lee as well as his two daughters.
IPO plans for Samsung Everland - a company that Kiwoom Securities has valued at around 8 trillion won ($7.8 billion) - come amid a flurry of asset transfers within the Samsung Group since 2013.
While the group has yet to disclose a clear plan for the restructuring or how the succession will play out, analysts expect Samsung Everland to emerge in some form as the control tower from which the group manages all of its affiliates.
Its planned listing, as well as one already planned for Samsung SDS, an IT solutions firm, should also help Lee Kun-hee's children cope with a hefty inheritance tax bill.
Lee Kun-hee's net worth - including real estate and stakes in public companies - is estimated at some 13 trillion won, and inheritance taxes may come to more than 6 trillion won, according to Chung Sun-sup, chief executive of Chaebul.com, which specializes in research on South Korea's industrial conglomerates.
"Once the Everland shares list and establish a market price, they could be used as collateral to secure cash," he said, adding that the siblings may also divest their holdings in SDS.
SDS is worth 15.4 trillion won and Jay Y. Lee's stake is worth 1.7 trillion won, based on the latest traded price of its shares in the over-the-counter market.
Samsung Everland in a statement on Tuesday said it would use proceeds from the IPO to expand its businesses, including its fashion operations and biomedical affiliate Samsung Biologics Co Ltd.
It plans to name managers for the IPO this month and a spokesman said the listing would likely be completed by the first quarter of 2015. The company declined to provide further details. A Samsung Group spokeswoman also declined to comment on how the Everland IPO will affect the succession process.
Samsung Everland is about a quarter-owned by Jay Y. Lee, who is its biggest single shareholder, and the Lee family as a whole controls about 46 percent of the company.
While an IPO for Samsung Everland is not expected to affect the heirs' holdings in flagship firm Samsung Electronics, it could give them more control over other affiliates in the long run, analysts said.
"The listing allows for greater latitude for Samsung in the restructuring process; ultimately Samsung Everland will become a holding company, stand at the top of the group's hierarchy and control all other affiliates," said HI Investment analyst Lee Sang-hun.
In addition to its fashion and biomedical interests, Samsung Everland also has major holdings in Samsung Life Insurance which in turn has interests in Samsung Electronics as well as construction company Samsung C&T Corp and Samsung Card.
Samsung Everland reported revenue of 3.23 trillion won and an operating profit of 111.1 billion won in 2013.
Analysts add that some of the Samsung Group companies could sell their minority stakes in Samsung Everland and Samsung SDS and use the proceeds to strengthen the group's control in various affiliates or expand into new business lines.
($1 = 1024.0000 South Korean Won)
(Additional reporting by Jungmin Jang and Hyunjoo Jin; Editing by Edwina Gibbs)