"Samsung became a world leader only because chairman Lee could keep his management control distant from external influence," said Kim Houng Yu, a professor at Kyung Hee School Of Management in Seoul. "Once the cross-shareholding structure breaks off, the Lee family's control over the group will be weakened and they will be left more vulnerable to outside influences."
Shareholders, for example, could step up pressure on Samsung Electronics to increase dividends as cash grows beyond the current $58 billion, according to Claire Kim, an analyst with Daishin Securities Co. They could also press for strategy shifts or capital spending cuts as growth slows, she said.
The elder Lee is an outsized figure in Korea who built Samsung into the most powerful conglomerate, or chaebol, with more than twice the revenue of the next biggest group, according to the Korea Fair Trade Commission. In the process, he became the country's richest man with an $11.4 billion fortune, according to the Bloomberg Billionaires Index.
Succession became a more pressing issue this year after he suffered a heart attack. Under Korean law, heirs have to pay taxes of 50 percent when inheriting such wealth, signaling a bill approaching $6 billion, said Kim Hyeon Jin, a tax attorney at Shin & Kim in Seoul. Though it's possible to avoid taxes by putting stock into a foundation, the family may lose some control over those assets in any case, he said.
The Lees are planning to take two Samsung businesses public, which will help cover the inheritance taxes and comply with tighter government limits on conglomerates. One of them is Cheil Industries Inc., a small but strategically important operator of zoos, golf courses and the Caribbean Bay, billed as one of the largest water parks in the world.
While Samsung Electronics is the biggest business, much of the family's power stems from Cheil, known until this month as Samsung Everland Inc. The closely held business is the family's de facto holding company, with direct and indirect stakes in the electronics, finance and trading arms. The other company going public is Samsung SDS Co., a provider of technology services.
Cheil, for example, owns 19.3 percent of Samsung Life Insurance, which in turn has a 7.6 percent stake in Samsung Electronics. The smartphone maker owns 37.5 percent of Samsung Card Co., which completes the circle through a 5 percent stake in Cheil.
The family has complete control at Cheil now. Lee Jae Yong holds 25 percent of the equity, while his sisters Lee Boo Jin and Lee Seo Hyun have 8.4 percent each and their father holds 3.7 percent. The rest largely consists of friendly stakes held by other group companies. Analysts say non-family shareholders may sell stock in the IPO, leaving the Lees in charge.
While the offerings will raise cash and create a more transparent structure to satisfy the government, they'll also expose parts of the empire that have so far remained hidden. Cheil and SDS will have to report their financial results and personnel decisions publicly; they'll also be vulnerable to the influence of activist investors.
"It was the cross shareholding structure that made it all possible for Chairman Lee and his family to control Samsung with a tiny stake," said Park Ju Gun, president of corporate watchdog CEOSCORE. "Without that structure, it's almost nonsense for Lee Jae Yong to have the same control."
A spokeswoman for Samsung Group declined to comment on succession or structural changes, and declined to make members of the Lee family available for interviews.
The younger Lee, also known as Jay Y. Lee, graduated from Seoul National University, the top school in South Korea, and is credited at Samsung with forging strong partnerships with Google Inc. and Apple. Still, he won't command the same respect and authority that his father has had because he's largely unproven, said Chung Sun Sup, chief executive officer of corporate researcher Chaebul.com.
"The market is somewhat jittery about Samsung's future without Chairman Lee," he said. "Whether it's Lee Jae Yong or not, there's a big question about whether the successor will have enough charisma or leadership to get the support and faith that Lee Kun Hee had.
Samsung has faced little outside pressure so far, in part because Samsung Electronics has grown to dominate the mobile- phone industry. The business has struggled more recently however, with operating profit declining for three straight quarters. Chinese manufacturers such as Xiaomi Corp. are gaining customers by offering inexpensive devices packed with features, while Apple competes more aggressively for premium buyers.
The stock has fallen 2.5 percent this year and is about 16 percent below a record last year.