SK Group to create $82 million fund to invest in Japanese companies

SK Group headquarters in Seoul [Photo by Kim Ho-young]

SK Group, South Korea’s second-biggest conglomerate, is creating a fund to invest in Japanese materials, parts and equipment companies in line with the Korean government’s efforts to enhance cooperation between Korea and Japan.

SK square Co., an investment-focused company under SK Group, is creating a fund worth 110 billion won ($82 million) to invest in Japanese materials, parts, and equipment companies, according to sources from the investment banking industry on Thursday. Analysts are closely watching whether Korean and Japanese companies will be able to stand up to global supply chain restructuring through voluntary collaboration.

SK Group affiliates, such as SK telecom Co. and SK hynix Inc., and financial companies such as Mirae Asset Financial Group are reportedly discussing ways to participate in the fund. SK plans to expand the fund gradually by supplementing its strategies. Their first investment targets are expected to be those that have synergy potential with Korean companies.

“A Japanese company that receives funds from a Korean company provides opportunities for more cooperation between Korean and Japanese companies,” an official from the investment banking industry said. “In the face of global supply chain restructuring, Korean and Japanese companies could create a cooperative system based on their strengths.”

The fund is reportedly being created under the direction of SK Group Chairman Chey Tae-won. Chey, who also serves as the chairman of the Korea Chamber of Commerce and Industry, has been paying attention to cooperating with Japan. In 2021, SK Group invested 400 billion won to establish an investment unit in Japan and purchased a 10 percent stake in TBM Co., a Japanese eco-friendly material company, for about 140 billion won.

SK’s move seems to be in response to the Korean government’s policy of promoting cooperation with Japan. The Korean government reinstated Japan to its whitelist of preferential trading partners on Monday, giving a boost to expanding economic cooperation with Japan.

Since Korea-Japan relations soured following Korea’s Supreme Court ruling in 2018 that ordered Japanese companies pay compensation to wartime forced labor victims in Korea, the business community has raised the need to resume cooperation with Japan. Localization of key materials has accelerated since Japan’s export restrictions in July 2019, but some key materials are still highly dependent on Japan.

SK Group has made investments, including mergers and acquisitions, the main pillar of its business expansion and has recruited financial experts from local and foreign investment banking and private equity industries.