National Pension Service Opposes SK Innovation-SK E&S Merger, Citing "Shareholder Value Damage"

SK Inno's 2nd Largest Shareholder Opposes Due to Shareholder Value Damage
SK Rebalancing Faces Major Obstacle Amid National Pension Service Opposition
Proxy Advisory Firms Divided, Sustainvest Votes 'Against'

The National Pension Service has decided to vote against the merger plan between SK Innovation and SK E&S. Due to the opposition from the National Pension Service, the SK Group's restructuring of its governance (rebalancing) has encountered its biggest obstacle.

The National Pension Service Fund's Stewardship Committee held its 10th meeting on the 22nd to review the direction of voting rights exercise regarding the SK Innovation merger plan. As a result, it decided to oppose the approval of the merger agreement, citing "significant concerns about shareholder value deterioration."

The SK Innovation shareholders' meeting will be held on the 27th. The merger, which requires a special resolution, must obtain approval from more than two-thirds of the shareholders present and at least one-third of the total issued shares. According to SK Innovation's semi-annual report, SK Holdings is the largest shareholder with a 36.22% stake, and the second-largest shareholder is the National Pension Service with a 6.21% stake. Minority shareholders holding less than 1% each collectively own 53.49% of the shares. Foreign shareholders account for approximately 22%.

The National Pension Service's decision to oppose appears to have been influenced by the voting advisory firm Sustainvest's recommendation to vote against. Sustainvest stated, "In the merger process between the listed company SK Innovation and the unlisted company SK E&S, which share the same largest shareholder, the merger ratio was calculated in a way unfavorable to SK Innovation's common shareholders without sufficient consideration of conflict of interest issues," adding that "there are concerns about long-term shareholder value deterioration."

On the other hand, the ESG Research Institute and global voting advisory firms ISS and Glass Lewis recommended supporting the merger. Their core argument was that the merger ratio was appropriate and the corporate valuation was properly conducted. Following the recommendations of these two advisory firms, which account for 90% of the global voting advisory market, the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) decided to vote in favor of the merger.