Samsung Electronics are considering splitting into two separate entities, it confirmed on Tuesday, but refrained from going into any further detail.
The company has faced increasing pressure from investors to make structural changes and boost shareholder value, with a split into a holding unit and an operating company being one of the solutions encouraged by US activist hedge fund Elliott Management.
However, Samsung provided little detail to investors in its statement, causing shares to flatline. In a statement, it said it was “absolutely neutral” as to whether to proceed with the split:
“The review does not indicate the management or the board’s intention one way or another,” adding that the review that is expected to take at least six months.
The company promised to return 50 percent of free cash flow for 2016 and 2017, and raise the dividend for 2016 by 36 percent compared to the previous year.
It also pledged to nominate “one new, international, independent board member” as well as create a separate governance committee to oversee the group’s redirection.
Pressure has increased on the company this year after a series of malfunctioning products, culminating in the permanent cessation of the production of its flagship Galaxy Note 7.
Samsung said in a statement:
“We recently readjusted the production volume for thorough investigation and quality control, but putting consumer safety as top priority, we have reached a final decision to halt production of Galaxy Note 7s,” the company said.
“For the benefit of consumers’ safety, we stopped sales and exchanges of the Galaxy Note 7 and have consequently decided to stop production.”
Though in its early days, the proposal for a split into two companies has received support from several of Samsung’s investors. It also enabled more control to be given back to the company’s founders, the Lee family.