Samsung Holds Off on Adopting a Holding Company Structure

Samsung Electronics (ssnlf) said on Friday it will be difficult to adopt a holding company structure at this time, rejecting U.S. activist hedge fund Elliott Management’s proposal and ruling out for now a long-anticipated succession move.

Investors had expected the global leader in smartphones and memory chips to adopt a holding company structure, as the founding Lee family tries to solidify its control of the Samsung Group flagship ahead of a leadership succession.

But Chief Executive Kwon Oh-hyun told the annual shareholder meeting this was unlikely at this stage, giving investors their first insight into how the South Korean tech giant is approaching a potential restructuring amid a political scandal that has embroiled Samsung Group chief Jay Y. Lee.

“There are negative effects that would arise from transitioning to a holding company so it does not appear it will be easy to do so at present,” Kwon said, without elaborating what those negatives were.

The comments sent shares of Samsung C&T (samsung.ct) down nearly 7%. As Samsung Group’s de facto holding company, it was seen as a likely beneficiary if Samsung Electronics adopted a holding structure.

Some analysts believed Samsung’s Lee family members would seek to merge C&T, which they firmly control, with the Samsung Electronics holding company as the final succession step.

“Investors have been hoping for change for Samsung Electronics and more broadly Samsung Group, but this suggests that process will be delayed,” said CJ Heo, a fund manager at Alpha Asset Management.

Elliott in October called for the firm to adopt a holding company structure by splitting itself in two and paying out a 30 trillion won ($ 26.75 billion) special dividend.

Samsung announced a review in November but until now has maintained a neutral stance on the holding structure issue.

An Elliott spokesman declined to comment.

POWER SHIFT

Some investors said the mooted restructuring appears to have been delayed with Lee’s arrest on charges of bribery, embezzlement and other offenses in a corruption scandal that has already led to the removal of President Park Geun-hye from office.

The 48-year-old leader of Samsung Group and Samsung Electronics’ vice chairman could face more than 20 years in prison. He denies the allegations.

For more on the Samsung bribery trial, watch Fortune’s video:

Samsung Group patriarch Lee Kun-hee remains incapacitated following a May 2014 heart attack. His children face a multi-billion dollar inheritance tax when he dies, providing an impetus to quickly strengthen their grip on key affiliates such as Samsung Electronics.

Investors believe a restructuring could streamline the company, improve its governance and boost its value.