Samsung may split in two, report

Company may restructure due to pressure from investors

Samsung Electronics has said it is considering splitting in two, after political and governance scandals and the recall of Note 7 devices have led to renewed pressure from investors.

2016 was a disastrous year for the South Korean giant, with the damage caused by the exploding batteries in the flagship Note 7 phablet and subsequent recall likely to cost 6.1 trillion won (£4.2bn). Samsung's woes mean that it is no longer the most profitable maker of Android phones, with China's Huawei taking that accolade.

Furthermore, Samsung's offices were raided by prosecutors as part of political scandal which may ultimately topple President Park Geun-hye.

There have long been concerns among investors about the company's complex structure, and the calls for a split are not new, but Samsung's current position has given the upper hand to investors including the US hedge fund Elliott Management which owns 0.6 per cent of the company, which are now increasing their demands that Samsung be divided into two units: an operational enterprise and holding company.

Elliot also wants Samsung to pay out 30 trillion won (£21bn) in a special dividend to shareholders.

Samsung has not disclosed its plans yet, although it is reported to be considering the option of a split, according to the Seoul Economic Daily.

Such a move would allow a smooth takeover by the company by Lee Jae-yong from his father Lee Kun-hee, who suffered a heart attack in 2014 but remains leader of the Samsung Group.

A break up of Samsung into two separate companies would be welcomed by investors, according to analysts.

"It's difficult to argue with the logic of Elliott's proposals," David Smith, head of corporate governance at Aberdeen Asset Management Asia told Reuters.

"A simpler structure is certainly preferable, and yes most would agree they can afford to pay out more. What is important is that these changes should benefit all involved, including family, group, and minority shareholders," he said.

Other changes may be in store for Samsung too, with Lenovo mulling a purchase of the firm's ailing PC business for around one trillion won (£680m).