This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Samsung Heavy Pulls In Samsung Engineering

NEW YORK (The Deal) -- South Korea's Samsung Heavy Industries will absorb sister company Samsung Engineering in an all-share transaction worth about 2.5 trillion won ($2.5 billion) that aims to create a single, fast-growing onshore and offshore oil and gas services business.

Under the deal terms, Samsung Engineering shareholders will be invited to swap each share for 2.36 new shares in Samsung Heavy. The exchange ratio valued Samsung Engineering shares at W63,628 each, based on Samsung Heavy's share price of W26,927. That represented a slim discount to Samsung Engineering's Friday closing price of W63,900, though sharp rises in the price of both companies' shares pushed the deal to a premium following its announcement on Monday.

"Samsung Heavy Industries will gain engineering, procurement, and project management capabilities...and establish a stable foundation for the growth of its offshore plant business," said Samsung Heavy. "Samsung Engineering, which has focused its business in onshore hydrocarbon plants, will be able to diversify into high value-added projects such as onshore LNG and offshore plants."

The merger comes amid a wider reshuffling of Samsung assets driven by a desire to cut overlapping operations and as South Korea's government steps up its efforts to dismantle the conglomerates, known as chaebols, that dominate its economy. Analysts are also watching Samsung for signs that the business could be broken up by the family of Lee Kun Hee, the company's billionaire chairman, who was hospitalized in May following a heart attack.

Cheil Industries, which houses Samsung's electronics and fashion assets and acts as the wider group's de facto holding company, is preparing for an initial public offering in 2015. That sale could raise cash to enable Lee's three children to split up the group.

A combined Samsung Heavy and Samsung Engineering would have had sales of about W25 trillion last year. Management said it hopes that the combination will drive sales to about W40 trillion by 2020. The deal will be voted on at a meeting on Oct. 27 and is expected to complete by Dec. 1.

Shares in Samsung Heavy closed on Monday at W28,950, up W1,700, or 6.2%. on their Friday close, equating to a market capitalization of W6.69 trillion. Samsung Engineering shares closed at W71,900, up W8,000, or 12.5%, leaving it with a market capitalization of W2.88 trillion.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,805.41 +127.51 0.76%
S&P 500 1,964.58 +13.76 0.71%
NASDAQ 4,483.7150 +30.9230 0.69%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs