SK, Prioritizing Business Direction Over Subsidiary Mergers and Personnel Reshuffles

Adjusting the Pace of Rebalancing
Confusion Over Leadership Changes in Underperforming Affiliates
SK Inno-SK E&S Merger Talks Take Shape
Attention on Chairman Chey Tae-won's Decisive Move

There are expectations that the timing of SK Group's business rebalancing will be delayed beyond initial forecasts. The possibility of postponing personnel reshuffles is also gaining traction.

Although dismissals of heads of affiliates with recent poor management performance have taken place, the group plans to focus on finalizing the direction of its business to avoid unnecessary unrest within the group.

A senior SK official commented on the recently discussed affiliate mergers and personnel reshuffles on the 26th, stating, "So far, all group personnel decisions have been made by each company's board of directors, including the opinions of Chairman Chey Tae-won," adding, "The SK Supex Council neither advises nor issues directives." This means that the SK Supex Council cannot reorganize businesses or carry out personnel changes.

[Image source=Yonhap News]

Within SK Group, there had been assessments that a full-scale personnel reshuffle might have begun recently with the replacement of some CEOs. Park Kyung-il stepped down as president of SK Ecoplant, replaced by Kim Hyung-geun, SK E&S's head of finance. At SK On, which has been mired in poor performance, Chief Commercial Officer (CCO) and Vice President Sung Min-seok was dismissed from his position just 10 months after being hired last August. Additionally, SK Square's CEO Park Sung-ha recently received a dismissal notice due to unsatisfactory performance.

SK Group is scheduled to hold a management strategy meeting on the 28th and 29th, but it is more likely to focus on discussing the group's business direction rather than specific rebalancing matters such as affiliate mergers and alliances.

Chairman Chey is currently on a business trip to the United States, emphasizing meetings with big tech companies to the extent that it is being called an AI business trip. SK Hynix is maintaining its leadership in the high-bandwidth memory (HBM) market, which has rapidly grown due to AI expansion, while SK Telecom has been successfully operating the generative AI service ‘A.Dot’.

Earlier this month, Chairman Chey emphasized, "Securing ‘AI leadership’ through the expansion of digital businesses such as semiconductors is also important." A senior SK official also evaluated, "With SK Hynix's HBM gaining recognition, cooperation with big tech companies has become possible."

Inside SK, however, the merger of Innovation and E&S is becoming a foregone conclusion. To secure business expertise in power generation and hydrogen sectors, SK E&S will be merged in the form of a company-in-company (CIC), while SK Innovation will gain financial improvement effects and cash-generating power through the merger. For this reason, there are expectations that the boards of directors of both companies will approve the merger next month.

Separate from rebalancing, efforts to secure financial resources are also active. The holding company SK Inc. is exercising a put option (stock sale right) with Masan Group, the second-largest distribution company in Vietnam, to realize investment returns in cash.

Recently, SK Pharmteco, a contract development and manufacturing organization (CDMO) affiliate specializing in biopharmaceuticals, has been negotiating the sale of its CDMO plant in Petersburg, Virginia, USA, with Novo Nordisk, a major Danish pharmaceutical company. SK Inc. stated that the plant sale does not involve a core facility in its bio business. SK is also reportedly discussing cooperation plans with the Korea Development Bank to secure funds necessary for business restructuring.