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SK to convert to holding company system Contents
title SK to convert to holding company system
attachment date 2007-04-11 count 14064
- Splits SK Corp. into holding company and business company
- Build simple and transparent governance via holding company structure
- Meet market expectation on governance structure, enhance market efficiency and maximize shareholder value

SK Group will shift to holding company structure. SK Corp. held a board meeting on 11th and revolved agenda on company separation.

SK announced that it has “decided to develop holding company structure to have better governance structure, enhance efficiency by giving more independence to subsidiaries and to enhance shareholder value.” As a first step, SK has split its company into a holding company (SK Holdings) and a business company (tentatively named SK Energy/Chemical)

Hyunchul, Shin, CEO of SK Corp. added that, “Holding company will solely be responsible for investments in subsidiary while business subsidiaries focus on business and management to enhance efficiency. We will build simple and transparent governance structure to meet market expectation and prevent repercussion from financial crisis of a subsidiary on the other.

One SK official commented that, “In our IR meeting in February, major shareholders and investors had mentioned and requested holding company structure. Holding company structure is considered a positive move by not only shareholders but also external parties such as government and NGO. Accordingly, final decision has been made in this board meeting after in-depth review and discussion in the new board of directors last March.”

He also added that, “SK Corp. has long been considered as a role model in governance structure in Korea after having a transparent BOD since 2004 and a audit committee within BOD composed of all external directors. This decision is also a result of BOD’s effort to continuously improve governance structure.”

SK will simplify its governance structure by having the holding company overseas 7 key business provider such as SK Energy/Chemical (TBD), SK Telecom, SK Networks, SK E&S, SKC, SK Shipping and K-Power. (refer to attached exhibition on governance structure)

Once SK becomes a holding company, SK Energy/Chemical can secure environment to focus on its own business space and remove discount factors from credit rating agencies from complex ownership structure. As for SK Telecom and SK Networks, both companies can enhance business efficiency through independent management structure while enhancing financial structure by selling shares in subsidiaries.

The company separation of SK Corp. will take a form of ‘spin-off’ where shares in two companies are given to existing shareholders in proportion to their ownership and date of spin off is upcoming July 1. SK Corp. will also hold an ad hoc shareholder’s meeting for a special resolution (on May 29). The holding company will be the incumbent company and SK Energy/Chemical (TBD) will be the new company.

Major assets in the holding company will comprise of equity of SK Telecom and SK Networks that SK Corp. used to own. SK Energy/Chemical (TBD) will own SK Incheon Refining, DOPCO shares that are directly related to its core business.

Existing shareholders will be given shares in both companies based on net asset ratio. For example, 1 share of SK Corp. will be equivalent to 0.29 shares in holding company and 0.71 shares in the business company. Liability will also be distributed accordingly in both companies and both companies will have joint liability on company debt after the spin-off.

Furthermore, all subsidiary shares related to life science business in SK Corp. will stay in the holding company since holding companies main duty is also to incubate new business such as life science.

On management team appointment, currently the company is reviewing how to set to board of directors in both companies, which will be finalized by end of this month.

Holding company organization will largely leverage the existing investment management division that managed subsidiaries in the past while most of SK Corp.’s executives will move to SK Energy/Chemical (TBD). The new company will succeed all employment relationship, thus there will not be any changes to position of the executives.
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