SK Group chief ordered to pay $1 bn in divorce settlement

[Graphics by Song Ji-yoon and Yoon Yeon-hae]

An appellate court in South Korea on Thursday ordered SK Group Chairman Chey Tae-won to pay 1.38 trillion won ($1 billion) in property division to his estranged wife, Roh So-young, as part of their ongoing divorce settlement.

The amount is a significant increase from the 66.5 billion won ordered by the lower family court in 2022.

The Seoul High Court valued the assets of Chey and Roh, the director of Art Center Nabi, at approximately 4 trillion won, requiring Chey to pay Roh around 1.38 trillion won.

Chey‘s largest assets are stocks, and he is also known to hold various properties, including real estate and artwork.

Chey owns 12,975,472 shares, or 17.73 percent, of the group’s holding company SK Inc., which is worth about 2 trillion won.

HI Investment & Securities Co. analyst Lee Sang-heon said that Chey “can use the shares in SK as collateral for loans.”

Chey also holds a significant stake in SK siltron Co. SK acquired 51 percent of LG Siltron Inc.’s shares from LG Corp. for 620 billion won in 2017, and Chey entered into a total return swap (TRS) agreement for a 29.4 percent stake in Siltron at that time.

SK siltron is a semiconductor wafer manufacturer with sales of 476.2 billion won and an operating profit of 41.7 billion won in the first quarter of 2024.

Market estimates suggest that Chey‘s stake in SK siltron could be worth close to 1 trillion won. SK siltron is a privately held company.

Chey’s other stakes include preferred shares of SK chemicals Co. (3.21 percent) and of SK discovery Co. (3.11%).

“It may take time to dispose of the SK siltron stake,” Lee said, adding, “Chey personally owns 29.4 percent of SK siltron, but the acquisition process was not entirely clean, so there is room for criticism if it is disposed of for property division purposes.”

Although the Korea Fair Trade Commission concluded that Chey’s acquisition of SK siltron shares was an act of private interest, Chey and SK won the administrative lawsuit against the antitrust agency.

Some raised the possibility of selling SK siltron altogether. “In the case of SK siltron, the Korean conglomerate is more likely to cash out its stake through a sale rather than listing,” according to Kim Soo-hyun, head of research at DS Investment & Securities Co.

”Chey currently has a limited cashflow, which makes selling his stake in the company almost the only alternative,“ an investment banking (IB) official said, explaining why SK siltron is emerging as a potential sales target.

Major investment banks and law firms have already started preparing deal proposals related to SK. Bur market observers see it as unlikely that Chey will sell his SK shares to pay the divorce settlement. Given that Chey and his affiliates hold only about 25 percent of SK shares, a sale like this could destabilize his management control.

“The latest verdict is unlikely to have a significant impact on SK‘s governance,” HI Investment & Securities analyst Lee said. “A stake sale in the holding company would weaken Chey’s control over the group, so he is unlikely to sell his 17.73 percent stake in SK.”

SK Group‘s structure allows Chey and his affiliates to control subsidiaries through SK. He and his affiliates hold a 25.44 percent stake in SK while his sister, Chey Ki-won, chair of the SK Happiness Foundation and Chey Jae-won, senior vice chairman of SK Group, hold 6.53 percent and 0.14 percent respectively.

Overseas institutions also own 23.1 percent, individual investors and others 15.36 percent, and the National Pension Service 7.39 percent.

SK is the major shareholder of SK innovation Co. (34.5 percent), SK telecom Co. (30 percent), SK E&S Co. (90 percent), SKC Co. (40.6 percent), SK networks Co. (41.2 percent), and SK ecoplant Co. (44.5 percent).

The mood at SK Group is one of shock.

”The amount beggars belief,“ an executive said. ”While we respect the court’s recognition of Roh‘s contribution to SK Group’s growth, the group is currently in a state of panic.“

The business community is watching closely to see how this ruling will affect Chey‘s future public activities.

Chey serves not only as SK Group chairman but also actively representing the country’s economic interests as chairman of the Korea Chamber of Commerce and Industry.

He traveled around the world in 2023 to promote the Busan Expo bid and recently met with UAE President Sheikh Mohammed bin Zayed Al Nahyan during his visit to Korea.