Samsung Chairman Stable After Surgery Following Heart Attack

May 12, 2014 1:04 am ET

(Updates share price in fifth paragraph.)

May 12 (Bloomberg) -- Samsung Electronics Co. Chairman Lee Kun Hee, who helped generate almost a quarter of South Korea’s GDP by propelling a copycat manufacturer into Asia’s biggest technology company, is in stable condition after surgery following a heart attack.

Lee, 72, was operated on early yesterday at Samsung Medical Center after being resuscitated the previous night at Soonchunhyang University Hospital following an acute myocardial infarction, Rhee So Eui, a spokeswoman for Samsung Group, said in an e-mailed statement. Lee, who was treated for lung cancer in 2000, underwent a procedure to help him get more oxygen after experiencing difficulty breathing the night of May 10.

After taking over the Suwon, South Korea-based business in 1987, Lee built it into the world’s largest maker of smartphones, televisions and memory chips, becoming South Korea’s richest man in the process. In 2012, he appointed his son, Lee Jae Yong, vice chairman, and his daughter, Lee Boo Jin, president of affiliate Hotel Shilla Co. as Samsung Group grew into South Korea’s biggest conglomerate.

“Chairman Lee has made a significant mark not just for Samsung but also for the Korean economy as a whole, by helping it globalize when the country embraced the new high-technology era,” said Chung Sun Sup, chief executive officer of corporate researcher Chaebul.com. “That fuels even more concern over Samsung’s future and its fate amid his absence.”

Samsung Electronics shares have surged more than 130-fold since Lee replaced the group’s founder, his father Lee Byung Chull, as chairman. They rose by 4 percent to 1,388,000 won as of 2:02 p.m. in Seoul trading.

Chosen Successor

The patriarch chose his third son in 1971 ahead of two older brothers because they weren’t interested in the business, according to “The Lee Kun Hee Story,” a biography published in 2010. Lee Kun Hee was ranked among the world’s 100 most influential people by Time magazine in 2005.

Lee Kun Hee naming his son vice chairman “was an example of succession planning,” Heo Pil Seok, Chief Executive Officer at Midas International Asset Management Ltd. in Seoul, said by phone yesterday.

Lee also leads Samsung Group, which has more than 70 affiliated companies globally, including the electronics business. He has an estimated net worth of $11 billion, according to the Bloomberg Billionaires Index.

Mobile Sales

Since Lee Kun Hee took control in 1987, sales at Samsung Electronics surged to 228.7 trillion won ($223 billion) last year, making it the world’s largest electronics company by revenue. Lee initiated a company makeover in 1993 when he told employees in Germany he wanted Samsung to move up the manufacturing value chain and produce higher-quality products.

That year, Lee began overhauling Samsung Electronics after seeing the company’s products gathering dust in the corner of an electronics shop in Los Angeles, according to the biography.

By 2013, the Samsung Group affiliates generated 333.9 trillion won in sales, according to data from Korea’s Fair Trade Commission. That is equivalent to about 23 percent of South Korea’s gross domestic product, based on 2013 figures from the Bank of Korea.

Lee Kun Hee’s hospitalization comes as Samsung Electronics tries to rebound from posting the lowest sales in five quarters at its mobile-phone business, which accounts for 76 percent of operating income. Chinese producers are gaining in emerging markets with cheaper, feature-packed devices, and Apple Inc. is boosting iPhone sales through China Mobile Ltd. to better compete with Samsung’s high-end Galaxy S series.

Daily Operations

“I wouldn’t think Chairman Lee would be deeply involved in day-to-day operations,” said Steve Myers, an analyst with JI Asia in Tokyo. “Samsung is of a size and complexity, and I would think they have a bureaucracy in place, so they can handle unexpected events.”

Shares of the world’s largest smartphone maker have gained 1.2 percent this year, compared with a 2.4 percent decline for the benchmark Kospi index. The stock had lost 9.9 percent last year after more than tripling in value in the four years through 2012.

Samsung Group consists of companies that build cargo ships, sell life insurance and run a theme park. Two members of the group are combining, with Samsung SDI Co., a supplier of batteries to Apple, agreeing to buy chemical and electronic materials maker Cheil Industries Inc. for about 3.5 trillion won in stock.

Meanwhile, Samsung Securities Co., South Korea’s largest brokerage by market value, will sell its entire stake in Samsung Asset Management to Samsung Life Insurance Co. for 272.8 billion won.

Another affiliate, information and communications technology provider Samsung SDS Co., plans to sell shares in Korea this year, according to a regulatory filing.

“This year we have seen a lot of handovers among the group’s affiliates -- Samsung SDS’s announcement that it’s going public, and Samsung Life Insurance taking over Samsung Asset Management,” Midas’s Heo said. “This was seen by the market as part of the succession speeding up.”