Samsung Plans Preferred Share Buybacks for Remaining Returns to Bypass Financial Affiliate Ownership Limits
Samsung Electronics announced in its Q3 earnings call that it plans to allocate a significant portion of its remaining 55-75 trillion KRW shareholder return funds to buying back and cancelling preferred shares. This strategy aims to prevent Samsung Life and Samsung Fire's ownership stakes from exceeding regulatory caps under South Korea's Financial Industry Structure Improvement Act, avoiding forced divestitures while executing large-scale capital returns.
South Korean tech giant Samsung Electronics disclosed during its third-quarter earnings conference call on October 29 that its remaining shareholder return funds for this year amount to between 55 trillion and 75 trillion KRW. This figure represents the balance after deducting the 35 trillion KRW already executed or finalized from the total annual shareholder return plan of 90 trillion to 110 trillion KRW.
Samsung Electronics CFO Park Soon-chul stated that the company recognizes the market's high interest in the price difference between common and preferred shares. He added that when repurchasing and cancelling treasury stock, the company will actively consider and adjust the proportion of preferred share purchases. This indicates that a substantial part of the remaining funds will be used for preferred share buybacks and cancellations rather than traditional cash dividends or common share cancellations.
This strategic shift is directly linked to ownership restrictions on financial affiliates under South Korea's Financial Industry Structure Improvement Act. Currently, Samsung Group's financial subsidiaries, Samsung Life Insurance and Samsung Fire & Marine Insurance, hold approximately 10% of Samsung Electronics' common shares combined, reaching the regulatory limit. Large-scale cancellation of common shares would passively increase these financial affiliates' relative ownership ratios, potentially triggering additional divestiture obligations. In contrast, cancelling non-voting preferred shares does not affect the voting rights distribution of common shares, allowing capital returns without violating regulatory red lines.