Samsung Group, South Korea's largest conglomerate, has been rapidly merging its various affiliates this year to ease control and streamline its key businesses -- electronics, finance and construction.
According to executives of component suppliers to Samsung's defense and chemical affiliates, Samsung's top brass had been mulling how to get rid of these affiliates as they didn't have much synergy with its key businesses and was underperforming.
A senior Samsung executive, who declined to be named, said: "We must throwaway unnecessary businesses and focus on our key growth areas, such as electronics."
Samsung Techwin, Samsung General Chemicals, Samsung Total and Samsung Thales will be handed over to South Korean conglomerate Hanwha for 1.9 trillion won ($1.7 billion). The related and required approval processes will commence in January and will be finished within the first half of next year, the Group said via a statement.
This is the first time since the 1997 Asian financial crisis, in which Samsung sold its entire automobile business, that the South Korean tech giant is selling off an entire business worth billions of dollars.
Samsung Electronics, Samsung C&T, Samsung Securities and other affiliates will sell their 32.4 percent share of Samsung Techwin -- the company's surveillance, aeronautics, optoelectronics, automations and weapons technology affiliate -- for 840 billion won ($758 million) to Hanwha Holdings. Samsung C&T, Samsung SDI, Samsung Electro-Mechanics will also sell their 57.6 percent share of Samsung General Chemicals to Hanwha Chemical and Hanwha Energy for 1.6 trillion won ($1.44 billion).
Samsung C&T, the current major shareholder of Samsung General Chemical with 38.4 percent control, will retain 18.5 percent of its share and collaborate with Hanwha in chemical businesses.
Samsung Techwin manufactures CCTV, chip-making equipment and self-propelled artillery. Samsung Thales, a joint venture with France's Thales International, makes military radars and ship's battle command systems. Samsung General Chemicals produces purified terephthalic acid (PTA) that is used to create polyester. Samsung Total, a joint venture with France's Total Group, makes ethylene.
Samsung previously merged its electronics component arm Samsung SDI with textile firm Cheil Industries' industrial material division. Samsung Techwin spun out its semiconductor equipment division. The conglomerate also attempted to merge its construction affiliates Samsung Heavy Industries and Samsung Engineering, its shipbuilder and plant maker, respectively. The merger fell through due to shareholder opposition, but it will likely try again in future.
Local analysts also believe that Samsung will change its current cross-shareholding structure into a holding company structure, to better control its wide array of affiliates. Currently, despite being all the affiliates being branded 'Samsung,' Samsung has no eponymous holding company that owns shares of all of the companies. The entire group is controlled by the Future Strategy Office, the de facto chairman's office and control tower of the conglomerate, which is not a legal entity but which exercise control by being the chairman's representative.