South Korea's “M & A King” SK Group is transferring away from fossil fuels

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SK Group, South Korea's third largest company, has vowed to end all new overseas oil and gas investments and cut carbon emissions by two-thirds as it plans to switch from fossil fuels.

The U-turn by one of Asia's leading manufacturers of oil, computer chips and batteries for electric vehicles is a victory for international investors and environmental activists who have intensified their criticism of Asian companies' response to climate change.

The move, led by SK chairman and largest shareholder Chey Tae-won, is also a symbol of how the acquisitive Korean group is raising its challenge to the country's leading chaebol, the family-owned conglomerates that dominate the economy , reinforced.

Mr. Chey has ordered that a comprehensive adjustment of the SK portfolio should be completed within the next three years. That includes spinning off carbon-intensive companies and doubling the company's multi-billion dollar stakes in electric vehicles, computer chips, biotechnology, and renewables.

“The era of competition for scalability is now behind us. . . We want to be the best company in ESG, ”Jang Dong-hyun, president of SK Holdings, who helps oversee SK's 125 subsidiaries, told the Financial Times in an interview.

The linchpin of SK is promoting M&A activities and investments. In recent weeks, the group bought Intel's memory business for $ 9 billion and spent $ 1 billion on South Korea's largest waste disposal company. SK Innovation, the oil refining unit increasingly focused on electric vehicle batteries, is spending $ 8 billion building factories to serve automakers in the US, China and Europe.

James Lim, an analyst with the US hedge fund Dalton Investments, said the strategy had "borne fruit" with some international investors. "SK is several steps ahead of most other chaebol when it comes to future-oriented portfolio restructuring and ESG investing," he said.

Mr. Jang said the changes are "inevitable".

Competing Korean companies, including Samsung and Kepco, the state-backed energy company, have been selected by European pension funds and environmental groups to support the coal industry.

59-year-old Chey has overseen the family-owned SK Group's rapid growth since taking over the company after his father passed away in 1998 during the Asian financial crisis.

SK now generates more than half of its sales overseas, employs 100,000 people and has made Mr. Chey one of the richest men in South Korea.

SK group-wide assets increased sevenfold to W225.5 billion ($ 202 billion) in the past year under Mr. Chey's leadership. Sales quadrupled to Won139tn and net profit increased 80 times to Won8tn.

One industry leader described the company as "a kingdom built on mergers and acquisitions".

The recent deal spurt has led to proposals that SK should look to SoftBank, the Japanese telecommunications company that became a tech investor.

SK is reluctant to take on the SoftBank settlement, insisting that its M&A strategy be focused on buying companies that strengthen the existing business rather than reducing non-core units.

“Controlling the entire value chain has many advantages, as you can create synergies through cooperation between units. . . This improves your understanding of the entire company or the entire industry and thus reduces the risk of failure, ”said Jang.

SK lacks global brand awareness from competitors such as Hyundai and LG. But the newfound attention has revived nasty questions about family control, corruption, political ties, and intellectual property theft.

Mr. Chey was convicted of accounting fraud and misappropriation of company funds in 2003 and 2014. His stays behind bars were canceled and he later received pardons from the president. SK declined to comment, finding that the legal processes were complete.

The company is currently accused of illegally acquiring the sensitive EV technology from Korean competitor LG Chem. This is a dispute that threatens his $ 2.6 billion investment to build factories in Georgia, the largest single investment in the US state's history. SK denies the claims.

The company has been commended by several investors, including Mr. Lim, for pioneering other chaebol by abandoning a complex network of cross-shareholdings for a more conventional holding structure and bringing in outside, independent directors.

For some, however, the reputation stain from previous misconduct remains.

Kim Woo-chan, economics professor at Korea University, said, “The level of (alleged) fraud was many times higher than that of Enron, and Mr. Chey has been jailed twice for serious financial crimes, but he still controls the group – this would be unthinkable in the West. "

The SK Group traces a turbulent rise from the ashes of the Korean War

1953

Foundation of Sunkyong Textiles

1980

Acquired Korea Oil (now SK Innovation), South Korea's top refinery

1994

Acquisition of Korea Mobile Telecom Service (now SK Telecom), South Korea's leading mobile operator

2008

Acquisition of Hanaro Telecom (now SK Broadband), a South Korean broadband provider

2012

Acquisition of Hynix (now SK Hynix), the second largest DRAM manufacturer in the world

2016

Acquisition of OCI Materials (now SK Materials), a South Korean semiconductor materials company

2017

Acquisition of LG Siltron (now SK Siltron), a South Korean manufacturer of silicon wafers

2018

Acquisition of AMPAC, a US pharmaceutical contract manufacturer

2019

Acquisition of KCFT (now SK Nexilis), the world's largest manufacturer of battery copper foils

2020

Acquisition of EMC Holdings, South Korea's largest waste management company