Explainer: South Korea's SK Group considers asset sales, mergers as part of major overhaul

SK Networks Co

25/06/2024 02:15

By Joyce Lee and Heekyong Yang
       SEOUL, June 25 (Reuters) - South Korea's SK Group
 034730.KS  plans to hold a two-day strategy meeting starting
Friday to discuss streamlining its business to focus on key
areas including artificial intelligence, chips and batteries.
    The group, best known for its chip firm SK Hynix
 000660.KS , has become bloated over the past decade and its
electric vehicle battery unit has lost billions of dollars.
    Here is what's known about the expected restructuring:
    
    WHY AND HOW MIGHT SK TRY TO RESTRUCTURE ITS BUSINESSES?
    South Korea's second-largest conglomerate encompassed 219
companies as of May, the most among the country's 88 business
groups, according to the Korea Fair Trade Commission. By
contrast, Samsung Group, the biggest conglomerate by assets, has
63 firms and Hyundai Motor Group has 70.
    The SK conglomerate has been thinking about a revamp since
four senior executives stepped down late last year. Its main
money maker, SK Hynix, also suffered heavy losses last year,
stretching the conglomerate's finances.
    The meeting, which will include executives from the parent
company and affiliate firms, will look at options from mergers
to divestments, according to a source with direct knowledge of
the matter who was not authorised to speak to media and declined
to be identified.
    A SK Group spokesperson described the conglomerate's review
of its businesses as a "routine management activity" to help it
better respond to "a changing business environment, including
geopolitical issues." 
    
    BATTERY BLUES
    SK Innovation  096770.KS , which owns the country's largest
oil refiner and battery maker SK On, is expected to pursue a
merger with profitable gas affiliate SK E&S to help prop up SK
On, local media outlets have reported.
    SK Innovation has said it is considering various strategic
measures including mergers to strengthen its competitiveness,
but nothing has been decided.
    SK On has never made a profit since it was split off from SK
Innovation in late 2021. Its cumulative operating losses amount
to about 2.3 trillion won ($1.7 billion) while its
debt-to-equity ratio was 188% as of end-March.
    But the conglomerate sees batteries as a long-term growth
area and is trying to cut back investments in other units so it
can better support SK On, analysts say. 

    OTHER BUSINESSES LIKELY TO BE AFFECTED
    The conglomerate may also merge builder SK EcoPlant and SK
Materials' industrial gas unit, the Korea Economic Daily
reported on Sunday, citing unidentified industry sources.
    SK EcoPlant and SK Materials said they were not aware of
such discussions. 
    SK Networks  001740.KS , which sells smartphones and manages
hotels, said last week it would sell its car rental unit to
private equity firm Affinity Equity Partners for 820 billion won
($590 million). 
    The group is also in talks to sell its 9% stake in Vietnam's
Masan Group back to the retail-to-telecoms conglomerate, an SK
spokesperson said. 
             
    
    ($1 = 1,390.0900 won)

 (Reporting by Joyce Lee and Heekyong Yang; Additional reporting
by Ju-min Park; Editing by Miyoung Kim and Edwina Gibbs)
 ((joyce.lee@tr.com;))