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Samsung heir strengthens control in conglomerate with inheritance

Samsung Life jumps 4% as Lee Jae-yong inherits half of father's stake

Samsung is South Korea's biggest and most powerful family-run conglomerate.    © Reuters

SEOUL -- Imprisoned Samsung Electronics Vice Chairman Lee Jae-yong has strengthened his grip on South Korea's largest conglomerate after inheriting half of his late father's stake in Samsung Life Insurance, the largest shareholder in the world's biggest manufacturer of smartphones and memory chips.

Lee's holding in Samsung Life jumped to 10.44% from 0.06% as he inherited 53.7% of late Samsung Chairman Lee Kun-hee's 19.34% share, according to the company's regulatory filings.

The younger Lee's two sisters -- Hotel Shilla CEO Lee Boo-jin and Samsung Welfare Foundation Chair Lee Seo-hyun -- inherited stakes of 6.92% and 3.46%, respectively, in the life insurer. Their mother and the widow of Lee Kun-hee, Hong Ra-hee, inherited no stake in Samsung Life, the Friday filings show.

Lee Kun-hee's stakes in Samsung Electronics and Samsung C&T, however, were split among all four heirs by the legal ratio for survivors -- one third for Hong and two-ninths each for the three children, boosting Hong as the largest individual shareholder in Samsung Electronics with a 2.3% stake, followed by Lee Jae-yong who now owns 1.63%.

But despite his small holding, Lee Jae-yong still controls Samsung Electronics -- the engine of the broader Samsung Group conglomerate -- through his stakes in Samsung Life and construction company Samsung C&T, as he is the largest individual shareholder in Samsung Life and the biggest overall shareholder in C&T at 18.13%.

Lee is serving out a two-and-a-half year prison term for bribery and embezzlement.

Shares of Samsung Life rose 4.04% on Monday in expectations for the company's bigger role in Samsung Group, South Korea's biggest and most powerful family-run conglomerate, or chaebol.

Attention has been focused on the share dispersal since Lee Kun-hee, the son of the conglomerate's founder, died in October at the age of 78. Lee had long controlled its dozens of companies in a circular fashion through strategic stakes and crossholdings.

Activist investors have long criticized Samsung's corporate governance and decried what they see as an opaque management style. But analysts say that the Lee family essentially chose the status quo.

"There was some speculation that Lee's sisters might spin off financial affiliates, but it did not happen, as Lee Jae-yong inherited half of the [Samsung] Life Insurance stake," said Park Sang-in, a professor at the Graduate School of Public Administration, Seoul National University.

"It means that Samsung will stick to a 'one Samsung' policy as Lee Jae-yong controls both [Samsung] Life Insurance and [Samsung] Electronics."

Park said that Hong, 75, continues to play a significant role in the conglomerate as she inherited her share in Samsung Electronics, confounding market expectations that she might give it up.

The distribution of Lee Kun-hee's assets comes as the family paid one-sixth of its $11 billion inheritance tax on Friday, the biggest amount ever levied in South Korea. The family will pay the remaining tax over a period of five years.

The family also donated more than 23,000 pieces of artwork owned by Lee to the National Museum of Korea and the National Museum of Modern and Contemporary Art, including works of Claude Monet, Pablo Picasso and Paul Gauguin.

The government has welcomed the donation, saying the museums will host special exhibitions starting in June. The donations mean that the family need not pay any inheritance tax on the art.

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