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| SK Group Chairman Chey Tae-won speaks at a company event held online last month. Courtesy of SK |
By Kim Bo-eun
SK, Korea's third-largest business group, has recently been realigning its businesses in an apparent move to boost efficiency and secure funds to foster new businesses after the COVID-19 pandemic ends. But the reorganization is facing a backlash from investors who are claiming it has undermined corporate value and will end up incurring losses for them.
SK decided recently to split some businesses up into new entities and integrate existing units. SK appears to be gearing up to concentrate resources on its semiconductor and electric vehicle battery businesses, as well as streamlining entities focusing on investments in future growth sectors.
One of the group's largest reorganization efforts is the planned split-off of SK Innovation's (SKI) battery and oil and gas production business, scheduled for next month.
The new battery affiliate plans to draw needed funds via an initial public offering, but this will take time, given the battery business has yet to see stable profit. The battery business, however, needs funds immediately to scale up production.
SKI said it will spend 1.23 trillion won to build its fourth battery plant in China. Investments for the plant will be made starting this month through December 2024. The battery company also needs to pour 3 trillion won into a planned joint venture with the U.S. carmaker Ford.
SKI has prepared part of immediately needed funds by selling off shares of another wholly owned subsidiary, SK geo centric, formerly named SK Global Chemical.
But SKI's split-off plan has sparked a backlash from investors, given the company's shares have been on a downward trajectory since the announcement in July. Prior to the announcement, SKI's share price reached as high as 302,000 won on June 24 during intra-day trading, but is now down by nearly 20 percent.
At the center of the controversy is the way SKI has chosen to separate its battery business ― via a split-off. Under the planned split-off, existing shareholders of SKI will be unable to obtain shares in the new battery business. Shareholders regard the remaining entity with its less attractive conventional petrochemical business as unpromising.
A petition appeared on Cheong Wa Dae's website on Aug. 20, demanding the group Chairman Chey Tae-won be held accountable for the losses that retail investors are facing.
"As the Korea Chamber of Commerce and Industry's chairman and the chairperson of SKI's largest shareholder SK Inc., Chey is being introduced by the media as a businessman engaging in ESG management, but he is pushing for the split-off of SKI, which is hard to understand from the perspective of SKI investors," the petition said.
The petition stated SKI should have conducted a spin-off which would have provided shareholders shares of the new entity.
A spin-off and a split-off are different ways for companies to divest their assets or subsidiaries. A spin-off distributes shares of the new entity to existing shareholders, while under a split-off, stocks of the divested firm are transferred to the parent company.
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