NPS to veto SK Innovation’s battery unit split-off

South Korea’s pension fund is set to veto SK Innovation Co. 's plan to split off its battery unit as the move could undermine shareholder value.

The National Pension Service’s (NPS) is the No. 2 shareholder of SK Innovation with an 8.05% stake after SK Inc. that owns 33.4%.

“We agree with the intention and the purpose of the split-off plan, but we decided to opposite the move due to concerns that the unlisting of core sectors such as the battery business could hurt shareholder value,” the NPS said on Sept. 14.

The pension scheme had vetoed LG Chem Ltd.’s split-off of its battery business last year with similar reasons.

The NPS may have been worried about a potential discount in a parent company as shareholders often suffer discount when a core unit of a company becomes a subsidiary through a split-off.

SK Innovation’s split-off plan is likely to get the nod at an extra ordinary shareholders’ meeting on Sept. 16 despite the NPS’ decision, which may have some impact on votes by other shareholders such as foreign pension funds or asset managers.

A split-off needs approval from at least two-thirds of the voting rights of shareholders attending the meeting, and agreement from at least one-third of the total number of stocks.

The country’s top energy company last month decided to split off the battery business and its petroleum unit. The company is scheduled to propose the hive-off of SK Battery Co. and SK E&P Co. at the shareholder meeting this week. Once stakeholders endorse the plan, both of the companies will become wholly-owned subsidiaries, while taking assets and debts for the split units.

LG Chem’s split-off of LG Energy Solution was approved as an 82.3% of shareholders passed it.

Write to Ji-Hye Min at spop@hankyung.com
Jongwoo Cheon edited this article.