"20 Subsidiaries + α" SK Group Securitization, Remaining Subsidiaries?
by Park Soyeon
Published 11 Mar.2024 07:24(KST)
Updated 11 Mar.2024 13:52(KST)
SK Group's Recent 5 Years: Over 20 Affiliates Sold, Investment Attraction, and IPOs
Equity Liquidity and Business Restructuring Leave About 10 Remaining Affiliates
Intensive Overhaul of Non-Core Businesses, Launching Major Structural Reforms
SK Group is set to readjust its affiliate portfolio. Over the past five years, SK Group has sold, attracted investment in, or listed about 20 affiliates, and it is now signaling plans for investment attraction and business restructuring for around 10 more affiliates.
According to the investment banking (IB) industry on the 11th, SK Group is currently conducting a diagnostic review of all its affiliates for portfolio readjustment. The investment industry expects that SK Group will complete the review of all affiliates within the first half of the year and will likely begin the sale of non-core businesses in earnest from the second half.
Among SK Group affiliates, companies that have been sold, attracted investment, or listed within the last five years include SK REITs, SK Biopharm, SK Pharmteco, SKM AP, SK IET, SK On, SK Enmove, NanoEntek, T Map Mobility, SK Shieldus, One Store, SK Broadband, SK E&S, SK Ecoplant, SK Networks, SKC, SK Eco Engineering, SK Enpulse, SK PU Core, SK Plasma, SK Chemical, and SK Bioscience, totaling about 20 companies.
From the perspective of equity fluidity and business restructuring, about 10 affiliates remain. These include SK Specialty (special gases), Korea Oil Pipeline Corporation, SK T&I (trading), SK Entum (tank terminal), SK Rent-a-Car, SK Elec Link (electric vehicle charging), SK PIC Global (petrochemical products), SK KCFT (secondary battery copper foil), and SK Advanced (petrochemicals). The IB industry predicts that SK Group will undertake large-scale business restructuring. An IB industry insider said, "The current SK Group stance reads as a major business restructuring and affiliate equity sales."
SK Group is considered one of the most proactive groups in utilizing the capital market. It has grown by using funds raised in the financial market for facility investment, business expansion, and mergers and acquisitions (M&A). Since acquiring SK Hynix in 2012, the group has grown through bold investments in semiconductors, bio, and other sectors. From 2018, it has been a leader among large conglomerates in expanding ESG (environmental, social, governance) investments. According to Korea Ratings, SK Group invested about 20 trillion KRW annually in facility investments from 2018 to 2021. In 2022, it expanded the scale by investing approximately 35 trillion KRW.
However, as the high-interest rate trend has prolonged, the virtuous cycle of expanding cash flow after large-scale investments, recovering investment funds through initial public offerings (IPOs), and reinvesting has started to falter. With worsening internal and external environments, the debt that supported SK Group’s growth has become a burden due to high interest rates, raising concerns about financial soundness both inside and outside the group.
SK Group’s total borrowings increased from about 40 trillion KRW in 2018 to approximately 120 trillion KRW as of the end of the first half of 2023. The demand for funds to expand new businesses continues to grow. Large-scale investments remain inevitable in key sectors such as semiconductors and batteries. For SK Group, significant funds are required for battery facility investments, including building factories in the U.S. and expanding factories in China. SK On, a secondary battery company, needs to invest an additional 23 to 24 trillion KRW over several years, including 7 trillion KRW this year.
Recently, Choi Chang-won, Chairman of the SK SUPEX Council, has taken the lead in a high-intensity overhaul of SK Group’s non-core businesses. Chairman Choi is expected to conduct a comprehensive review of SK Group’s investments and push for the sale of non-core assets and equity, initiating a major structural reform. The "Saturday Executive Meeting," which disappeared after the introduction of the five-day workweek in 2000, has been revived after 24 years. Additionally, SUPEX executives have all given up the flexible work system that allowed them to take every other Friday off. Furthermore, the investment centers scattered across SUPEX and the holding company SK have been consolidated, entering a state akin to emergency management.
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