SK Group streamlines structure in new merger

SK Group opened a new holding company with assets over 13.2 trillion won ($11.2 billion) and over 4,000 employees starting today. The company is part of the ICT and energy giant’s goal of streamlining its governance structure and enhancing the control of Chairman Chey Tae-won.

The new holding company is the result of a merger between ICT developer SK C&C and SK Holdings, announced April 20 and completed July 24.

SK C&C and SK Holdings will run separately under a single roof, with current SK Holdings CEO Cho Dae-sik maintaining his position and SK C&C CEO Park Jung-ho resuming his post, as per the decision made during a June shareholders’ meeting.

The two companies will also remain in their current buildings, with SK Holdings staying in Jongo, downtown Seoul, and SK C&C in Bundang, Gyeonggi.

The name of the new holding company will be SK Holdings although SK C&C has a higher ratio in the share swap.

But to reduce confusion, the ICT unit will adopt the name SK Holdings C&C.

SK Group in 2007 converted into a holding company system, but it utilized a complicated dual governance structure.

Chairman Chey Tae-won and his brother owned the controlling shares of SK C&C, and the ICT company in turn had the controlling stake of SK Holdings. SK Holdings controlled the rest of the affiliates including flagship SK Telecom, SK Innovation and SK E&C.

The merger of SK C&C and SK Holdings into a single holding company streamlines the management process.

“After we converted into a holding company [in 2007] we made several achievements including becoming a conglomerate with an annual revenue of over 100 trillion won and acquiring SK Hynix,” said SK Holdings CEO Cho during a shareholders’ meeting in June. “But as the management environment became harsher we came to the conclusion that an innovative change was necessary.”

Cho said that the overall group’s value was underappreciated by the stock market because of the double listing, but that the merger would resolve this. He added that the merger will also provide the group with the opportunity to fully concentrate on its five fastest growing businesses.

With the merger, SK Group set a goal of turning the conglomerate into a major global player with an annual revenue of 200 trillion won and pre-tax profit of 10 trillion won by 2020.

To achieve its goal it will concentrate in the five growth projects in areas extending from ICT convergence, energy, biomedicine, semiconductor materials and modules.

The merger is also expected to reduce the debt-to-asset ratio to 46 percent. Prior to the merger the debt ratio of SK C&C was 198 percent while SK Holdings was at 46 percent.

At the June shareholders meeting, more than 80 percent of shareholders voted in support of the merger.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]