By Jonathan Cheng
SEOUL -- Samsung Electronics Co. said it would raise dividends and consider restructuring as the world's largest smartphone maker seeks to appease growing demand for governance reforms.
Over the long term, the company said Tuesday it wants to return any cash in excess of 70 trillion Korean won ($59.8 billion) to shareholders. At the end of September, Samsung had slightly more than 70 trillion won in cash on hand after subtracting debt. The company also said it would appoint a new independent board member with global experience.
Samsung's package of measures comes as it reels from a damaging smartphone recall that has already cost more than $5 billion and has clouded its earnings outlook for the year.
It also comes two weeks after it spent $8 billion in an all-cash deal to acquire Harman International Industries Inc., as Samsung seeks new growth opportunities in automotive technology.
Lee Sang-hoon, Samsung's chief financial officer, said on a call with analysts Tuesday that it needed its cash cushion in part to fund deals like the Harman acquisition.
Samsung's package of proposals follows years of pressure from investors, in particular foreign institutions, who have called on Samsung to part with more of its growing cash pile, restructure the company and appoint more diverse board members.
U.S. activist hedge fund Elliott Management Corp., which nearly derailed a merger of two Samsung affiliates last year, in October called for Samsung Electronics to split itself in two and pay a one-time dividend of about 30 trillion won to shareholders. Elliott also wanted Samsung to promise to return at least 75% of the company's profits each year after capital expenditures.
Samsung's new proposals fall short of what Elliott called for last month, but they could help the broader conglomerate buy more time amid continuing calls from investors and government officials for a simplification of its complicated ownership structure, which consists of 58 affiliates bound together by cross-shareholdings.
"We view the plan outlined by Samsung to be a constructive initial step, " Elliott said in a statement. "We anticipate more meaningful changes following the company's corporate structure review."
Samsung said it was weighing "the possibility of creating a holding company structure" and said it is also looking into listing the company's shares on an additional international exchange. But it said that the process would take at least six months and it doesn't have any particular outcome in mind "one way or another."
In addition to corporate restructuring, Samsung also said that it would seek a new company director with international corporate experience to diversify a board that currently consists of nine Korean men. It will also establish a new governance committee made up entirely of independent board members to replace an existing corporate social responsibility committee.
On shareholder returns, Samsung said that it will return half of its profits after capital expenditures this year and next to shareholders, after saying last year that it planned to return between 30% and 50% of that money. It also said its dividends -- which will be paid on a quarterly basis starting next year, versus twice a year in thepast -- would total 4 trillion won this year, up 30% from last year.
In 2013, when the shareholder demands began, Samsung returned just 7.2% of its net profit to shareholders in the form of dividends and buybacks, down from 40% in 2007. Samsung has since raised its returns to about 20%, but that level remains well below those of peers like Apple Inc. and Qualcomm Inc., which return 70% or more of their cash to shareholders.
Samsung shares were largely unchanged in midday trading Tuesday and were about 1% off their all-time high.
Write to Jonathan Cheng at email@example.com
(END) Dow Jones Newswires
November 29, 2016 12:49 ET (17:49 GMT)
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