SK Innovation-SK E&S Merger Approved by Board of Directors... Merger Ratio Set at 1 to 1.19

SK Corp., Secures Over 60% Stake in Merged Entity

The merger between SK Innovation and SK E&S has been approved. A mega energy company with assets exceeding 100 trillion won will be created.

On the 17th, SK Innovation and SK E&S each held board meetings and announced the approval of the merger plan. The major shareholder, SK Inc., holds 36.22% of SK Innovation’s shares and 90% of SK E&S’s shares, so the merged company’s shareholding ratio will be in the 60% range.

The merger ratio is 1 to 1.1917417. The merger price for SK Innovation was set at 112,396 won, and for SK E&S at 133,947 won.

Initially, it was widely expected that the merger ratio would be 1 to 2, but the actual difference was small. From the perspective of existing minority shareholders of SK Innovation, the company value was relatively generously evaluated compared to the stock price. On the other hand, financial investors (FIs) such as Kohlberg Kravis Roberts (KKR), which holds about 3 trillion won in redeemable convertible preferred shares (RCPS) of SK E&S, may oppose the merger.

The merger of the two companies is part of SK Group’s rebalancing (business restructuring) efforts that have been underway since the beginning of the year. In particular, this merger was pursued to revive SK On, which has been underperforming. SK E&S is a subsidiary operating energy businesses such as liquefied natural gas (LNG), hydrogen, and renewable energy, and is regarded within the group as a ‘cash cow’ with strong cash-generating capabilities.

SK stated, "By integrating the energy businesses and human and physical resources of both companies, we will establish a business structure that encompasses the entire value chain of the current and future energy industry. We aim to simultaneously enhance profitability and growth by building a stable profit structure and securing growth engines for future energy businesses."

Meanwhile, SK Inc. is scheduled to hold a board meeting on the 18th to discuss the merger plan between SK Innovation and SK E&S.