Samsung said it will increase dividends and buybacks and consider a corporate restructuring in its latest effort to appease anxious investors. Whether the moves will be enough, though, is dubious.
The South Korean electronics giant vowed to allocate 50% of free cash flow to shareholder returns for 2016 and 2017, and will return net cash in excess of $56 billion to $60 billion to shareholders. Samsung will initiate quarterly dividend payments starting in April of next year and “will seek to further enhance its capital allocation policy” to boost shareholder returns beyond 2017.
The move builds on a shareholder return program unveiled more than a year ago.
“We are committed to enhancing sustainable long-term value for our shareholders and to remaining good stewards of capital,” Oh-Hyun Kwon, vice chairman and CEO of Samsung Electronics, said in a prepared statement. “Today’s announcement extends the actions we initiated last year and represents the next phase in the evolution of our shareholder policy and governance.”
The move follows an open letter issued in October by activist hedge fund Elliott Management urging Samsung to streamline an ownership structure it deemed “unnecessarily complex.” Among other things, Elliott proposed that Samsung split the company and form a new Samsung Electronics business that would be listed on exchanges in New York and Seoul.
Samsung didn’t commit to any dramatic overhaul, but it said it will consider at least slightly restructuring its board.
“In recognition of the ever more global nature of Samsung Electronics business, the company’s board of directors is pursuing plans to invite new independent board members with international corporate experience,” the company said. “With the help of outside advisors, the board is in the process of identifying a number of highly qualified candidates and plans to nominate at least one new board member with robust global C-suite experience for approval at the next annual shareholder meeting in March 2017.”
It’s unlikely Samsung’s announcement will do much to calm investors’ nerves, though. Elliott has agitated for a dramatic restructuring, but The Wall Street Journal described Samsung’s plan as “a mixed bag of half measures and more promises.”
Samsung, of course, continues to suffer the fallout from the disastrous Galaxy Note 7 endeavor. The recalled handset cost the company roughly $2.3 billion in the third quarter, and CCS Insight said this week that the phone’s recall “resulted in a complete wipeout of the operating profit for Samsung’s mobile business.”