Chairman Chey Tae-won Appears Before Fair Trade Commission to Directly Explain... Three Key Issues in Siltron Acquisition

Choi Tae-won Attends Fair Trade Commission Plenary Meeting with President Jang Dong-hyun at 10 AM
Dispute Over Whether Siltron Share Acquisition Can Be Considered 'Business Execution'
Capital Market: "If Siltron Investment Was a Loss, Plenary Meeting Would Not Have Been Held"

[Asia Economy Reporters Choi Daeyeol, Hwang Yoonju, Joo Sangdon] SK Group Chairman Chey Tae-won attended the Fair Trade Commission (FTC) plenary meeting held on the 15th and personally explained that he did not usurp business opportunities from SK Inc. during the acquisition process of Siltron. This FTC plenary meeting is the first case to determine whether a conglomerate head’s acquisition of a minority stake in an affiliate constitutes depriving the company of its original business opportunity (misappropriation), drawing attention from the business community on what conclusion will be reached. If it is concluded that the chairman took the company’s opportunity for personal gain, it will become difficult for conglomerate heads to participate in the process of acquiring shares in subsidiaries in the future. This contradicts the argument that conglomerate heads should secure affiliate shares to ensure responsible management.

◆ The background of the private interest controversy surfacing after 4 years= Chairman Chey attended the plenary meeting held at the government Sejong Government Complex’s adjudication chamber from 10 a.m. together with SK Inc. President Jang Donghyun and his legal team. Chairman Chey entered the building with a stern expression without responding to reporters’ questions. The plenary meeting is the highest decision-making procedure of the FTC and usually concludes after one review session. Chairman Chey is scheduled to present to Chairman Cho Sung-wook and the commissioners in the morning, followed by a closed Q&A and oral arguments in the afternoon.

SK Group Chairman Chey Tae-won is entering the Government Complex Sejong on the 15th. / Sejong=Photo by Joo Sang-don don@

At the plenary meeting, fierce debates unfolded over whether Chairman Chey’s acquisition of Siltron shares could be considered a ‘business opportunity.’ According to Article 23 of the Fair Trade Act, it prohibits “providing business opportunities that would bring significant benefits to the company when performed directly by the company or through a company it controls” to related parties. Business execution must be steady and have a concrete substance. For example, providing business such as logistics or brand usage with guaranteed profits to related parties. Setting up separate affiliates to funnel work is a typical example and subject to sanctions. This is why there is opposition to viewing a conglomerate head’s equity investment as ‘business execution.’

It is common for major shareholders to invest together with the company or acquire affiliate shares. A representative case is Taiwan’s Hon Hai Group acquiring Japan’s Sharp in 2016 together with Chairman Guo Taiming. At that time, competition authorities in both countries raised no issues. SK Inc. and Chairman Chey’s acquisition of Siltron shares occurred one year later.

Whether SK Inc. deliberately gave up acquiring shares was also a contentious issue. Both Chairman Chey and SK Inc. deny this. SK Inc. holds the position that since it already secured more than two-thirds (70%) required for a special resolution at the general meeting, there was no reason to purchase more shares. Instead of additional Siltron shares, SK Inc. invested 490 billion KRW to acquire an 11% stake in the global logistics company ESR, and partially sold it last year to recover the principal after three years. Subsequently, it invested mainly in new businesses such as Grab (2018) and Ampac (now SK Pharmteco, 2018), generating profits. Chairman Chey also stated that the Siltron acquisition was made through a public competitive bidding process under the supervision of creditors.

◆ If it’s a big win, it’s private interest misappropriation; if a loss, no problem?= Whether mere share ownership can be considered to bring significant benefits is also a major issue. If the FTC concludes that a conglomerate head’s acquisition of affiliate shares constitutes providing business opportunities and resulted in gains, even share acquisitions aimed at ‘enhancing shareholder value’ could become subject to sanctions.

The capital market is also closely watching this issue. An investment banking (IB) industry official said, “The FTC held the plenary meeting because it interpreted capital market investments purely from a legal perspective. Investors conduct due diligence to avoid losses, and if the Siltron investment had resulted in losses, the plenary meeting would not have been held.” Share investments inherently involve risk of loss, and profit or loss is a retrospective matter.

Chairman Chey reportedly also rebutted claims that Siltron had secured a stable revenue source by having both SK Hynix and Samsung Electronics as customers and that he entered the investment expecting profits amid a semiconductor boom. An SK Group official said, “Around 2017, there was uncertainty as international associations gave negative evaluations of the wafer industry, and during the semiconductor downturn in 2018-2019, major wafer companies (Japan’s Sumco, Germany’s Siltronic, etc.) saw their stock prices plunge by over 50%. Siltron ranked fifth globally in the buyer’s market for wafers including Samsung Electronics, so if one knows even a little about the industry, it is hard to argue that value or profits were increased through funneling work.”

This content was produced with the assistance of AI translation services.