Billionaire Lee Jae-yong is buying $1.4 billion of Samsung stock from his own mother

Lee Jae-yong, the executive chairman of Samsung Electronics and South Korea's richest person, will buy about 1.9 trillion won of the company's shares from his mother, Hong Ra-hee, in a private transaction that lifts his personal stake and gives her cash to clear debts left over from the largest inheritance tax bill in the country's history.

Lee will acquire 7,188,793 shares, or 0.11 percent of the company, at 269,500 won each in an off-exchange transaction dated Oct. 12, Samsung Electronics said in a regulatory filing on Wednesday, Sept. 9. The purchase takes his holding to 1.58 percent.

The share count and price produce a total of about 1.94 trillion won, which is roughly $1.45 billion at 1,337 won to the dollar. Samsung and Yonhap, the South Korean news agency, put the figure at 1.9 trillion won, or $1.42 billion.

The price is not a family discount. Samsung Electronics closed at 269,500 won on Sept. 8, the session before the filing, so the shares change hands at the last traded price rather than below it.

Hong is expected to use the proceeds to repay loans she took out to pay inheritance tax after the death of her husband, the former Samsung chairman Lee Kun-hee, in 2020.

The bill that has shaped the family's finances for five years

Lee Kun-hee died on Oct. 25, 2020, leaving an estate valued at around 26 trillion won, made up of shares, property and one of the largest private art collections in Asia. The tax on it came to more than 12 trillion won, about $8 billion, the biggest inheritance settlement South Korea has recorded and equivalent to roughly half the country's entire inheritance tax take in 2024.

The family filed in April 2021 and paid in six instalments over five years under a deferred payment programme, completing the final payment earlier this year. Lee Jae-yong, Hong, and his sisters Lee Boo-jin, who runs Hotel Shilla, and Lee Seo-hyun, president of strategic planning at Samsung C&T, all carried a portion.

They handled it in different ways, and the difference matters. Hong and her two daughters sold stakes in group companies including Samsung Electronics, Samsung SDS and Samsung C&T, and entered stock trust agreements to raise money. Lee Jae-yong largely avoided selling shares in the core businesses, relying on dividends and personal loans instead, which preserved his position at Samsung C&T, the group's de facto holding company and the entity through which control of the conglomerate runs.

The tax is settled. The borrowing that funded it is not, which is what makes this transaction necessary.

The timing worked in the family's favour

South Korea's inheritance tax rate reaches 50 percent, rising to 60 percent on shares transferred by a controlling shareholder, and the bill has been watched for years on the assumption it would force the Lees to sell down and loosen their grip on Samsung. That did not happen, because the value of what they held rose faster than the debt they took on.

Samsung Electronics shares have risen roughly 270 percent over the past year on demand for high-bandwidth memory used in artificial intelligence systems. The company crossed a $1 trillion valuation in May. The stock reached 374,500 won at its 52-week high and now trades about 28 percent below that peak, still far above the 70,000 won low.

The Bloomberg Billionaires Index put the Lee family's combined net worth at about $45.5 billion in March, more than double the $20.1 billion of a year earlier, moving them from tenth to third among Asia's richest families. Bloomberg valued Lee Jae-yong personally at $26.9 billion at that point. Forbes put him at $34 billion on May 11 and ranked him the wealthiest person in South Korea. Forbes valued Hong at $11.2 billion, Lee Boo-jin at $12.4 billion and Lee Seo-hyun at $12 billion on the same date.

A tax bill that looked existential in 2021 has been absorbed by a chip cycle nobody had priced in.

What it means for control

The purchase is small in percentage terms and significant in direction. Lee Jae-yong's direct stake in Samsung Electronics has always been modest, a fraction of what his father held, and his authority over the group rests on Samsung C&T rather than on shares in the electronics business itself.

Buying his mother's block moves stock from a family member who has been selling to fund tax obligations into the hands of the person who runs the company, without any of it reaching the open market. It also removes a potential future overhang, since shares held by an heir with borrowings against them are shares that may eventually have to be sold.

Lee, 57, became executive chairman in 2022, two years after his father's death, and after years of legal proceedings connected to a 2015 merger of two Samsung affiliates that was central to the transfer of control from father to son. Hong, the daughter of a former South Korean media proprietor, has been honorary director of the Leeum Museum of Art, which houses much of the family's collection.

The transaction was disclosed a day after Lee appeared at the Élysée Palace in Paris alongside President Lee Jae Myung and Emmanuel Macron for the signing of a Samsung Electronics investment agreement with the French artificial intelligence company Mistral, part of a state visit that also produced a memorandum between Seoul and Paris on cooperation in artificial intelligence, semiconductors and quantum technology.

Neither Samsung nor the family has commented publicly on Hong's use of the proceeds beyond what appears in the filing.