The Korea Herald


SK Group set for major revamp for management efficiency

SK Networks approves of selling SK Rent-a-Car to Affinity Equity Partners for W820b

By Jo He-rim

Published : June 20, 2024 - 15:45

    • Link copied

SK Group Chairman Chey Tae-won speaks at a top executive meeting held at Grand Walkerhill Seoul on June 15, 2023. (SK Supex Council) SK Group Chairman Chey Tae-won speaks at a top executive meeting held at Grand Walkerhill Seoul on June 15, 2023. (SK Supex Council)

SK Group, the country's second-largest conglomerate by asset, is speeding up efforts to carry out a comprehensive overhaul of some 200 affiliates and business portfolios, starting with selling its affiliates and pushing for mergers.

SK Networks announced Thursday that it is selling 100 percent of its share of SK Rent-a-Car, its rental car service, to Affinity Equity Partners, a Hong Kong-based private equity fund, for 820 billion won ($600 million).

The move comes as the company intends to accelerate the advancement of artificial intelligence-focused business models for new growth, SK Networks explained.

“Our major business units and affiliates are developing business models using AI, and we are also working on building new systems to enhance our competitive edge working with our affiliates,” an SK Networks official said.

The company said it passed the divestment plan at a board meeting and will complete the process within the third to fourth quarter of this year.

SK Innovation, the country’s biggest private gas firm affiliated to SK Group, also appears to be reviewing the plan to merge with its sister firm SK E&S.

As a local daily reported SK Innovation is preparing for a merger with SK E&S, earlier on Thursday, the company reported in a regulatory filing that “nothing has been decided” on the issue, but it is considering such an option.

"We are reviewing various strategic measures, including a merger, to boost competitive edge in business, but nothing has been decided yet,” the company reported in the regulatory filing. The gas firm said it will release an additional filing when a decision is made, or within one month of Thursday's filing.

If the two companies proceed with the merger, they would become the 8th largest conglomerate with an asset of 106 trillion won.

According to industry sources, SK Innovation seeks to reduce the losses of its battery affiliate SK On. SK On has been logging operating losses for 9 consecutive quarters amid the downturn in the global electric vehicle market. It is also preparing to have an IPO and requires cash.

SK E&S, which focuses on renewable energy, including solar and wind, and liquefied natural gas, is considered a cash cow for the SK Group. The company logged a revenue of 11 trillion won and an operating profit of 1.3 trillion won last year.

SK Innovation, the country’s biggest private energy firm based on fossil fuel, recorded sales of 77 trillion won and an operating profit of 1.9 trillion won last year.

"It is too early to assume the merger will happen as there are many factors that should be considered and reviewed before we finalize the decision," an SK official said.

Following the report, SK Innovation's stock price jumped 15.57 percent to close at 121,000 won on Thursday.

SK Group is expected to review the merger plan and may issue final approval at the top executive meeting slated for June 28-29.

SK Group Chairman Chey Tae-won and other members of the founding family, including SK Innovation Vice Chairman Chey Jae-won and SK Supex Council Chairman Chey Chang-won, are expected to attend the meeting, along with other heads of SK companies.

There, the chiefs are also expected to discuss other measures to restructure their business portfolio to improve management efficiency and nurture new growth drivers.

Chey Chang-won reportedly told the executives in a meeting that it "does not make sense that the company has so many affiliates," and said they should reduce them to a "manageable" number, according to industry sources.

As of February, SK Group reported it has 213 affiliates to the Fair Trade Commission. The number is three times more than other major conglomerates, including Samsung Group's 63 affiliates, Hyundai Motor Group's 67 affiliates and LG Group's 63 affiliates.