South Korean billionaire Jay Y. Lee gets $1.9 billion Samsung shares gift from mother

South Korean billionaire Jay Y. Lee, the executive chairman of Samsung Electronics, will receive about 2.6 trillion won ($1.94 billion) worth of shares in the South Korean chipmaker as a gift from his mother, Hong Ra-hee, according to a regulatory filing.

Hong, the honorary director of the Leeum Museum of Art in Seoul, signed an agreement on Oct. 12 to give her son 11,158,000 Samsung Electronics common shares, the company disclosed on Tuesday. The transfer is scheduled for Nov. 12. The shares are valued at about 2.6 trillion won based on Tuesday's closing price of 232,000 won ($173), the Korea Herald reported.

The gift will raise Lee's holding to 116.38 million shares, or 1.75% of Samsung Electronics, from 105.22 million shares, or 1.58%. Hong's stake will fall to 0.82% from 0.99%.

The disclosure came a day after Lee completed an off-market purchase of 7,667,100 Samsung Electronics shares from his mother at 250,500 won each, a deal worth about 1.92 trillion won ($1.43 billion), according to BusinessKorea. The purchase was first announced in September, when it was valued at about 1.94 trillion won based on the share price at the time.

A large tax bill

Lee will have to pay gift tax on the shares. In South Korea, the tax on a gift of listed stock is calculated on the average closing price over the two months before and the two months after the transfer date, so the final amount will not be known until early next year. Based on Tuesday's closing price alone, the bill would be about 1.55 trillion won ($1.15 billion), the Korea Herald reported. The Korea Times put it at about 1.56 trillion won, including a premium applied to shares held by controlling shareholders. A top rate of 50% applies to gifts valued above 3 billion won.

Samsung Electronics shares have fallen in recent weeks, which could lower the tax. The stock closed at 259,500 won on Sept. 11, BusinessKorea reported, well above where it ended on Tuesday.

Neither Samsung nor the family gave a reason for the gift. Hong has been moving her Samsung holdings to her son, which the Korea Times said appeared aimed at helping him consolidate control of the conglomerate. Earlier, she gave Lee her entire stake in Samsung C&T, the construction and trading company that sits at the top of the group's ownership structure, lifting his holding in that company to 20.99% from 19.93%, broadcaster SBS reported.

End of the inheritance sales

The two deals mark the end of Hong's disposal of the Samsung Electronics shares she inherited from her husband, former Samsung chairman Lee Kun-hee, who died in 2020. Hong received 83,091,066 shares from his estate in April 2021, and the sale and gift bring her total disposals to exactly that number, according to BusinessKorea.

The Lee family faced an inheritance tax bill of about 12 trillion won ($8.9 billion), the largest in South Korea's history, and finished paying it in April in six installments that began in 2021. To raise the money, Hong and her daughters, Hotel Shilla Chief Executive Lee Boo-jin and Samsung C&T executive Lee Seo-hyun, sold shares and borrowed against their holdings. In April this year, Hong sold 15 million Samsung Electronics shares in a block trade for about 3.08 trillion won, the Korea JoongAng Daily reported. The September purchase by her son was widely seen as a way to help her repay loans taken out to cover the tax, according to the Korea Herald.

Industry officials expect the transfers to have a limited impact on the market because they take place within the controlling family and involve small changes in ownership, the newspaper said. Samsung Life Insurance remains the largest single shareholder of Samsung Electronics with 8.51%, while the controlling shareholder group, including affiliates, family members and related executives, holds 19.7% of voting shares, the Korea Times reported.

Lee, 58, is South Korea's richest person. Forbes valued his fortune at $33.9 billion in mid-September, ranking him 70th in the world. Hong was worth $11.2 billion in May, according to Forbes, when the magazine ranked her as the country's fourth-richest person behind her three children.