Samsung Sells Majority Stake in Unprofitable US Subsidiary AST

Strategic Insights -

Samsung Electronics has sold a 65% stake in its unprofitable US personal computer subsidiary, AST, to a group of US investors, marking the end of the company's ill-fated effort to establish a presence in the US computer retail market. The deal, led by Beny Alagem, former chief executive of Packard Bell, will see the US investor group incorporate AST as a new entity, AST Computer, and take over management from Samsung, which will retain a 35% stake in the joint venture. Samsung acquired a controlling stake in AST in 1994 for $337m and has since invested an additional $170m in 1997 and $50m last year to acquire the remaining 54% stake and improve AST's financial structure.

Key Takeaways:

  • Samsung is selling a 65% stake in AST, its US personal computer subsidiary, to a group of US investors at a considerable loss.
  • The deal will end Samsung's effort to establish a presence in the US computer retail market, a move that has resulted in large losses for the company.
  • Samsung has invested nearly $600m in AST, including $337m in 1994 and an additional $220m in 1997 and 1998.
  • The US investor group, led by Beny Alagem, will incorporate AST as a new entity, AST Computer, and take over management from Samsung, which will retain a 35% stake in the joint venture.
  • Samsung hopes to recover capital gains on the listing of the company.
  • AST has suffered large losses in the past few years, forcing Samsung to cut 75% of its workforce of 4,000.
  • The US investors hope to revive AST's fortunes as a computer-maker, leveraging its strong market recognition.

Statistics:

  • $12.5m: the amountSamsung will sell its stake in AST for.
  • 65%: the percentage of AST that Samsung is selling to the US investor group.
  • $600m: the total amount invested by Samsung in AST.
  • $337m: the amount Samsung invested in AST in 1994 to acquire a controlling stake.
  • 1994: the year Samsung acquired a controlling stake in AST.
  • $170m: the amount Samsung invested in AST in 1997 to acquire the remaining 54% stake.
  • 75%: the percentage of AST's workforce that Samsung cut.
  • 4,000: the number of employees AST had before the workforce reduction.

Sources:

  • "Samsung Sells Stake in AST." *Source.*