Samsung Electronics Announces Shareholder Return Plan

Korea on October 29, 2015
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Samsung Electronics announced a special shareholder return initiative program including share buyback and cancellation of 11.3 trillion won, which is equivalent to USD 10 billion. The buyback will be implemented in 3 to 4 stages and will be completed within one year.

 

The Board approved 4.2 trillion won for the first phase of buyback program. It will start on October 30 and last for approximately three months.

 

As of the day before the Board’s decision, preferred shares traded at approximately 22% discount to the common shares. Therefore, we will increase the percentage of preferred shares to be repurchased to 35% of the total shares to be purchased.  Based on these facts, we will purchase 2,230,000 shares of common stock and 1,240,000 shares of preferred stock during this first phase.

 

Samsung believes that the current share price and the market value of Samsung Electronics are severely undervalued both in terms of the ability to generate earnings and also in terms of the underlying asset or equity value of the company. Considering this severely undervalued nature of the share price, we feel that a share buyback at these levels is the correct decision.

 

The second part of our shareholder return initiative is the three years shareholder return policy.

 

Following a detailed review, Samsung has decided to implement a rolling 3-year shareholder return policy that will have the following components:

  • The company will return 30~50% of annual free cash flow to shareholders for the next three years
  • The annual shareholder return will consist of dividend and share buyback
  • The next three years’ annual shareholder return will focus primarily on dividends with the remaining allocated capital to be utilized for share buybacks
  • Any shares that are repurchased will also be cancelled

 

Samsung will announce 2015 year-end dividend in January, 2016 when the Board makes a decision.  The company hopes that the size and the direction of the shareholder return to be announced will be able to meet the expectations of our shareholders.

 

Meanwhile, Samsung is currently reviewing the introduction and implementation of quarterly dividend policy in 2016 and has asked for feedback from its shareholders on this matter.

 

While Samsung has invested more than US$20 billion in capital expenditures and US$12 billion in R&D during the past several years, the company has considered how to use the cash to create long-term value for the company as well as for its shareholders.

 

Moving forward, Samsung will continue to implement a consistent shareholder return policy to spur business growth and maximize its share value.

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