Image copyright AFP

Samsung Electronics has confirmed it is considering dividing the company into two separate firms.

The company has been under pressure from some investors to break itself into a holding unit and an operating company to boost shareholder value.

The South Korean technology giant also announced plans to increase dividends and said it would continue to buy back more shares.

Restructuring pressure had mounted after the Galaxy Note 7 fiasco.

In October, the company was forced to stop production of its flagship smartphone model after failing to resolve battery problems leading to overheating and the devices catching fire.

A 'thorough review'

Samsung said it would bring in "external advisers to conduct a thorough review of the optimal corporate structure."

The firm pointed out that "the review does not indicate the management or the board's intention one way or another."

Samsung also said it would pay out half of its free cash flow to shareholders for 2016 and 2017 and raise the dividend for 2016 by 36% compared to the previous year.

In order to improve governance, the firm said it would nominate at least "one new, international, independent board member" as well as create a separate governance committee.

The company's statement comes after US activist hedge fund Elliott Management called for the firm to split into a holding unit for ownership purposes and a separate operating company.

Why two companies?

The fund argued that a split would simplify the company structure making it easier to get a clear valuation of the firm's assets.

Currently, companies within the wider Samsung Group are linked through a complicated web of cross shareholding, linking Samsung Electronics to many other Samsung's firms and affiliates ranging from shipping, to heavy industries to insurance business.

That makes it difficult for investors to get a clear idea of what each individual Samsung company is actually worth.

The benefit of splitting Samsung Electronics into two companies would be that the cross-shareholding would affect only the holding company while the operating unit could be assessed separately - making it a lot easier to arrive at a clean company evaluation.

The proposal has won support from several of Samsung's investors and it is also thought that it would give back more control to the founding Lee family behind the company.