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Samsung may be white knight to SK

http://www.koreaherald.co.kr/SITE/data/html_dir/2004/12/10/200412100025.asp

Samsung Electronics Co., the nation's largest company by profit, may buy shares of SK Corp. to help the top oil refiner to fend off a hostile takeover attempt, analysts said yesterday.
In return for buying shares, Samsung may want to cement its leadership in the local handset market and restore its strained business relations with SK Telecom Co., the analysts said.

SK Telecom, the nation's No.1 mobile phone operator is the biggest domestic buyer of Samsung's handsets. SK Corp., the de facto holding company of SK Group, Korea's fourth-largest conglomerate, is the biggest shareholder of SK Telecom.

"Under the circumstances, the possibility is high," said Harrison Hwang, an analyst at Goodmorning Shinhan Securities.

On Wednesday, Samsung Electronics said in a regulatory filing that it plans to invest in a 250 billion won ($236 million) private equity fund to help manage its surplus cash by buying "premium" stocks. But it did not provide details on the investment.

Private equity funds are used to buy stocks of companies or acquire the management rights of the companies. They are accessible to super wealthy individuals, financial institutions or companies with substantial cash, like Samsung Electronics.

Until this week, Korean companies were not permitted to invest in the investment funds but with mounting concern over the ownership of Korean companies by foreign investors, the government opened the door to domestic interests.

Samsung Electronics denied speculation that it may buy shares of SK Corp. to defend its top management by Sovereign Asset Management Ltd., which wants to oust SK Corp. Chairman Chey Tae-won.

"There is no such plan (to buy SK Corp. shares). In fact, I think if we were really to help out SK Corp., we would have invested much more than 250 billion won," said No Seung-man, a Samsung Electronics spokesman with the Corporate Communications Team.

SK Corp. also denied the speculation that Samsung may provide support to help SK or the company itself asked Samsung for any assistance.

"We haven't asked Samsung or any other companies to help us," said a SK Group official.

Last week, a Seoul court finished hearing a petition by Sovereign to force SK to hold an extraordinary shareholders meeting. The court's decision is due soon. If the court rules in favor of Sovereign, the earliest meeting could be held in January.

Sovereign has said that it only is interested in ousting Chey, who was convicted and jailed last year on accounting fraud charges. He is on bail and back at work.

SK Corp., the nation's largest oil refiner, is scheduled to hold its annual shareholder meeting in March.

Over the next three months, SK Corp. and Sovereign would obviously like to see allies enlarge their stakes in the oil refiner or make initial purchases, analysts said.

Earlier this month, Pantech & Curitel, the country's third-largest mobile handset maker purchased 1.44 million shares of SK Corp., which would account for 1.12 percent of the outstanding shares. SK Telecom is one of the biggest customers of the handset maker.

Local analysts said any assistance that Samsung Electronics provides to SK Corp. could produce benefits to Samsung's battle against LG Electronics Inc. in the highly competitive mobile phone market.

There are two sectors at stake -the third-generation handsets, which are expected to make up roughly half of all mobile phones by 2010, and satellite digital multimedia broadcasting phones.

Despite Samsung Electronic's overall dominance in the global mobile phone market, LG Electronics has far outpaced Samsung in the growing market for European technology known as the W-CDMA (wideband code division multiple access) by starting early.

SK Telecom is set to enter the W-CDMA market next year and analysts believe Samsung would want to be on good terms with SK Telecom.

Lee Young-ju, an analyst at Dongbu Securities Co., also said a stock purchase could be a gesture by Samsung to patch up relations with SK Telecom, which went sour earlier this year over the latter's attempt to take over small-sized phone manufactures through an affiliate.

Samsung and other phone manufacturers opposed SK Telecom's move, which was subsequently shelved.

Some analysts said a Samsung attempt to help another family-owned conglomerate could tarnish its corporate image.

"The move is risky," said an analyst who declined to be named. For Samsung, the scale of the fund is insignificant but such a move could spark criticism from shareholder activists unless the management proved the decision was made in line with the interests of shareholders, he said.

Analysts also said a stock purchase would lack any commercial sense. "Samsung has maintained its dominant market share because of its manufacturing capability, product quality and brand power," said Ki Ho-jin, an analyst at Dongwon Securities Co. Samsung sells 95 percent of its handsets overseas markets.

Unlike the case of Pantech, the improved business relationship with SK will not help Samsung increase its market share significantly in the local market, he said. ([e-mail]) ([e-mail])





By Kim Jung-min and Kim Min-hee





2004.12.10