Elliott push for Samsung makeover puts founding family plans under microscope

A man walks at the Samsung Electronics' headquarters in Seoul January 7, 2015. REUTERS/Kim Hong-Ji/FilesA man walks at the Samsung Electronics' headquarters in Seoul January 7, 2015. REUTERS/Kim Hong-Ji/Files

Samsung Electronics Co shares jumped to a record high on Thursday after activist investor Elliott Management submitted unsolicited proposals for a radical corporate makeover at the world’s biggest smartphone maker.

An attempt by the U.S. hedge fund to wring change at South Korea’s biggest conglomerate last year failed in acrimony. But investors and analysts said Elliott’s latest move could open the way for the founding Lee family to embrace change, cementing its grip as it negotiates succession from its ailing patriarch to the next generation and a hefty inheritance tax bill.

The approach on Wednesday by Elliott, which owns 0.62 percent of Samsung Electronics, came as the tech giant faced fresh claims of problems with its flagship Note 7 smartphone, with a report that a handset began smoking inside a U.S. plane on Wednesday. Last month’s global recall of 2.5 million devices is set to show up in modest earnings growth guidance the firm is expected to report on Friday.

Samsung said it will “carefully review” Elliott proposals for restructuring, splitting the firm into a holding vehicle for ownership purposes and an operating company, as well as a hefty 30 trillion won ($27 billion) special dividend from its $70 billion cash pile. Shares rose as much as 5 percent to a new record as other minority investors voiced support.

Though there have been numerous theories on how the Lee heirs – Jay Y. Lee, 48, seen as the de facto leader of the Samsung Group conglomerate, and his two sisters – will ultimately secure control of Samsung Electronics, the group’s flagship company, the family has yet to publicly discuss its plans.

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