SK Group Accelerates Rebalancing Efforts Amid Financial Strain | Be Korea-savvy

SK Group Accelerates Rebalancing Efforts Amid Financial Strain

SK Group's headquarters in Seoul (Yonhap)

SK Group’s headquarters in Seoul (Yonhap)

SEOUL, June 20 (Korea Bizwire) – SK Group, South Korea’s second-largest conglomerate, is accelerating efforts to optimize its business portfolio to address inefficiencies and financial strain caused by overinvestment in its core battery and energy sectors.

As a first step, the group will hold a strategic management meeting with executives from key affiliates from June 28-29 to discuss its business rebalancing direction, according to industry sources.

Ahead of next week’s top-level meeting, speculations have arisen about potential sell-offs and mergers of SK affiliates.

Earlier in the day, in particular, a Korean newspaper reported that SK Innovation Co., a leading refiner and SK Group’s subholding company, will merge with its gas power generation affiliate, SK E&S Co., to form a large energy company.

However, SK Innovation denied the report, saying, “We are considering various strategic options, including a merger, to strengthen our business. But no decision has been made yet.”

Even after the company’s denial, the stock price of SK Innovation shot up over 15 percent to close at 121,000 won (US$87) on the main Seoul bourse.

Insiders noted that integration between SK Innovation and SK E&S is one option SK Group has been reviewing to reorganize the business portfolio of the energy, chip and telecom conglomerate.

SK Innovation is at the center of SK Group’s energy, petrochemical, battery and lubricant businesses, with nine subsidiaries, including SK Energy Co., SK On Co. and SK Enmove Co., under its wing.

SK E&S specializes in liquefied natural gas, community energy, and renewable energy.

A merger between the two firms could create a mega energy company with assets totaling about 106 trillion won, spanning fossil fuels to renewable energy.

SK Group sees this potential merger as a way to maximize economies of scale and offset the sluggish performance of SK Innovation’s battery subsidiary, SK On.

SK Group Chairman Chey Tae-won

SK Group Chairman Chey Tae-won

Other options for SK Group’s portfolio adjustment include merging SK On with SK Enmove for an initial public offering and selling a stake in SK IE Technology Co. to raise funds for investment.

SK Group’s all-out reform drive aims to streamline overlapping businesses among its 219 affiliates and divest non-core businesses, stemming from inefficient investments and poor performance of its key affiliates.

Chairman Chey Tae-won has previously highlighted the need for quality growth and warned against lax investment, calling for heightened vigilance to prevent a sudden collapse of the company.

SK Square, the group’s investment unit, posted an operating loss of 2.3 trillion won last year, while SK On has remained in the red for 10 straight quarters.

Consequently, SK Square dismissed its CEO Park Sung-ha, and SK On also replaced its Chief Commercial Officer Sung Min-suk.

Korea Investors Service Inc., a credit rating agency, noted that SK Group raised a total of 17 trillion won between 2020 and 2023, including 8 trillion won in debt, with its cash shortfall reaching 50 trillion won over the period.


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