SK Inc. approves merger of SK Innovation, SK E&S as shake-up commences

The holding company of SK Group approved the merger of SK Innovation and SK E&S in a board meeting, setting the two subsidiaries up to form Korea's largest energy company.

SK's Seoul headquarters in Jung District, central Seoul [NEWS1]

SK Inc., the holding company of Korea's SK Group, has increased its stake in energy and green businesses as part of the group's restructuring effort to enhance competitiveness in key sectors, according to the company Friday.

The company said its board approved a planned merger between its two major energy units, SK Innovation and SK E&S, at its board meeting held Thursday.

Both companies had already given the green light to the merger earlier in the week.

In addition, SK Inc.'s board approved a reorganization of Essencore, a semiconductor module reprocessing company, and SK Materials Airplus, a manufacturer of industrial medical gases for semiconductors, into subsidiaries of SK Ecoplant, a construction and recycling firm.

As a result of these shake-ups, SK Inc.'s stake in SK Innovation will rise from 36.2 percent to 55.9 percent, and its stake in SK Ecoplant will increase from 48.1 percent to 62.1 percent.

SK Inc. explained that these moves are part of its strategy to capitalize on the momentum in the energy and environmental sectors, which it sees as future growth engines.

The restructuring also allows SK's subsidiaries to consolidate their core competencies, improve financial stability and establish a more profitable structure, it added.

"The performance of subsidiaries is directly linked to the value of the holding company," an SK Inc. spokesperson said. "The purpose of our portfolio reorganization is to enhance the value of our subsidiaries by eliminating overlaps and creating synergies, thereby increasing SK Inc.'s corporate value."

The merger of SK Innovation and SK E&S is expected to create Korea's largest energy company, with assets exceeding 100 trillion won ($72.1 billion) and annual sales of 90 trillion won.

SK E&S operates in various energy sectors, including liquefied natural gas, hydrogen and renewable energy, while SK Innovation focuses on oil refining, petroleum product trading and oil development.

SK Inc. stressed that this combination is anticipated to eliminate redundant functions and boost competitiveness.

In addition to their conventional businesses, both companies have been actively promoting electrification.

SK Innovation is involved in electric vehicle batteries, energy storage systems and thermal management systems, while SK E&S focuses on charging infrastructure, renewable energy and energy solutions.

The reorganization of Essencore and SK Materials Airplus as subsidiaries of SK Ecoplant aims to lay the foundation for stable growth in the environmental sector and leverage the high profitability of the semiconductor business.

The integration of these companies is expected to generate synergies in eco-friendly recycling and semiconductor infrastructure, SK Inc. noted.

These mergers and reorganizations seem to mark the completion of the first stage of SK Group's business rebalancing project, which aims to streamline the organization by reducing its 219 affiliates through mergers and stock sales, thereby improving balance sheets.

"Creating synergy and stabilizing the organization is urgent," SK Innovation CEO Park Sang-kyu said at a press conference Thursday. "It's not appropriate for SK Innovation to seek additional changes at this time."

Last month, SK Group announced plans to secure 80 trillion won by 2026 for investments primarily in artificial intelligence and semiconductors to stay aligned with global trends.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr], YONHAP