SK innovation, E&S to vote on merger at shareholder meeting

SK Innovation CEO & President Park Sang-kyu is announcing a merger at a press conference on the morning of July 18. [Photo by Yonhap]

SK innovation Co. and SK E&S Co. are gearing up for Tuesday’s shareholder vote on the duo’s merger, with industry sources reporting divided opinions on Monday.

SK Group is proposing the merger to better navigate the evolving business landscape and enhance its competitiveness in future energy markets. If approved, the merger will create the largest private energy company in the Asia-Pacific region, with assets totaling 106 trillion won ($80 billion).

The merger ratio between SK innovation and SK E&S is set at 1 to 1.1917417.

The National Pension Service (NPS), the second-largest shareholder in SK innovation, voiced opposition to the move last Thursday, citing concerns over potential damage to shareholder value. The NPS argues that the merger ratio, based on SK innovation’s reference price, puts ordinary shareholders at a disadvantage. Advisory firm Sustinvest also recommended voting against the merger, arguing that the ratio is unfavorable to SK innovation’s ordinary shareholders.

Conversely, other advisory institutions have endorsed the merger, highlighting the synergies it will create. Global proxy advisory firms Institutional Shareholder Services Inc. (ISS) and Glass, Lewis & Co. likewise threw their support behind the merger, noting its potential to strengthen financial structure and enhance the company’s portfolio. They also affirm that the merger ratio complies with legal standards and that the company‘s valuation is fair.

The Korean ESG Research Institute, a domestic proxy advisory firm, also backs the merger, believing it will bolster financial stability and reduce investment burdens related to batteries.

To pass, the merger requires a special resolution at the shareholders’ meeting with at least two-thirds of shareholders present and more than one-third of issued shares needed for approval. SK innovation’s largest shareholder, SK Inc., holds 36.22 percent of shares while the NPS holds 6.28 percent. Individual shareholders collectively own over 20 percent.

The merger could face significant hurdles if those opposed to the move exercise their appraisal rights. Should the NPS fully exercise its appraisal rights, SK Group might need to purchase 681.7 billion won worth of shares, the upper range of the 800 billion won it has allocated for share purchases. The total amount could exceed this limit If ordinary shareholders also exercise their rights, and SK Group indicated it could cancel the merger or revise the terms if purchases exceed this amount.