South Korea’s SK Innovation Co., the parent company of the nation’s largest oil refiner, SK Energy Co. and battery maker, SK On Co., is reportedly planning to merge with its energy affiliate SK E&S Co. This merger is expected to create an asset company valued at 106 trillion won ($77 billion), making it Korea’s eighth-largest company. Shares in SK Innovation rose over 10% following the news on Thursday morning.
SK Group, the country’s second-largest conglomerate by asset, is actively restructuring its vast network of about 200 affiliates and business portfolios. As part of this overhaul, SK Networks announced the sale of its stake in SK Rent-a-Car to Affinity Equity Partners for 820 billion won ($600 million).
The merger between SK Innovation and SK E&S is expected to be decided by company executives in late June, pending shareholder approval. SK Innovation has acknowledged in a regulatory filing that it is considering various strategic options, including a merger, but emphasized that no final decisions have been made yet.
The merger plan is set to be reviewed at a meeting of key affiliate executives on June 28 and 29. Both companies will be holding their board and stakeholders’ meetings next month to discuss the proposal and outline subsequent measures.
With this, SK Group plans to streamline its extensive network of 219 affiliates and focus new investments primarily on artificial intelligence and semiconductors.
If successful, the merger would form the eighth-largest conglomerate in South Korea. SK Innovation recorded sales of 77 trillion won and an operating profit of 1.9 trillion won in 2023. Its shares surged over 15% following the merger report.
Meanwhile, SK E&S, a leading player in the LNG and renewable energy sectors, posted 11 trillion won in revenue and an operating profit of 1.3 trillion won last year. This merger would significantly strengthen SK Innovation’s financial position by integrating a profitable and stable company.
SK Group has been actively restructuring its portfolio, with plans to reduce the number of its 213 affiliates. SK Group Chairman Chey Tae-won shared a vision to make the conglomerate more manageable and efficient. The upcoming executive meeting on June 28-29 will likely be crucial in finalizing the merger decision and other strategic restructuring measures.
While SK Innovation has stated that no definitive decisions have been made regarding the merger, the company is exploring various strategic options to enhance its business competitiveness.
If approved, the merger is expected to be a pivotal step in SK Group’s ongoing efforts to focus on high-growth areas such as artificial intelligence and semiconductors while divesting from less strategic assets.
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