Samsung Group would be secretly grateful to U.S. activist investor Elliot Management Corp. for setting the stage for a generation change in leadership the conglomerate has long studied but could not easily expedite as most hereditary succession in family-run conglomerates can invite public backlash and scrutiny from authorities.

The idea of creating a holding entity from Samsung Electronics would allow the Lee family legitimate hold over the conglomerate and smooth transition from ailing chairman Lee Kun-hee to his son Jay Y. Lee.

Samsung Electronics would be able to accelerate the transition into holding entity as other foreign investors reportedly favor the idea put forward by Elliott.

Elliott proposed Samsung to separate into two and merge the holding company with Samsung C&T Corp., a way that could strengthen Samsung Electronics Vice President Jay Y. Lee’s control over the company. The group has long been scrambling for ways to reinforce his grip on Samsung Electronics, the group’s flagship company. But his voice is limited in terms of share ratio. The younger Lee owns 0.59 percent stake while his father Lee Kun-hee holds 3.55 percent and his mother Hong Ra-hee 0.76 percent. Its largest shareholder is Samsung Life Insurance Co. holding 7.43 percent, followed by Samsung C&T with 4.18 percent, Samsung Fire & Marine Insurance Co. 1.30 percent. It would cost more than 2.5 trillion won ($2.2 billion) to up the stake in the electronics giant by 1 percent.

The group pushed with Samsung C&T merger with Cheil Industries last year in order to give the younger Lee bigger say in the household Samsung company. Through the merger, the younger Lee became the largest shareholder in Samsung C&T with 17.08 percent.

Lee would command bigger influence if Samsung C&T where he is the largest shareholder merges under the holding company of Samsung Electronics, making him the unquestionable owner of the country’s largest conglomerate and the company. Lee already is readying to make himself legally responsible for Samsugn Electronics by proposing to become a managing board director in a shareholders’ meeting on Oct. 27.

But local regulations do not make it easy for the company to shift into a holding enterprise. The biggest obstacle would be Samsung Life Insurance. The possible demerge would give Samsung Life a new 7.43 percent stake in the holding entity but it has to sell it under the current financial law that bans creation or reinforcement of cross-shareholdings. Selling stakes won’t be easy either, because Samsung Electronics is banned from buying back stocks from Samsung Life under the capital market law, and other affiliates might not have enough money to buy the stocks.

By Lee Seung-hoon

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