SK Innovation may give shareholders SK On shares at IPO

SK Innovation Co. is set to consider providing stocks of its electric vehicle battery subsidiary to its shareholders when SK On Co., the world’s fifth-largest cell manufacturer, is listed, sending the share price of the leading South Korean refiner to a seven-month high.

SK Innovation said on Thursday it will consider a tender offer to buy back its own shares from shareholders and make payments with them instead of cash to boost shareholder value. The refiner is likely to cancel the treasury stocks purchased from shareholders.

“The size of the share swap would be flexible, but we are considering about 10% of SK Innovation’s market capitalization,” SK Innovation Chief Financial Officer Kim Yang-seob said in a discussion with stockholders after an annual shareholder meeting. Its market capitalization stood at 17.3 trillion won ($13.3 billion).

After the announcement, SK Innovation shares ended up 13.8% to 187,200 won in Seoul’s main stock market, far outperforming a 0.4% gain in the Kospi. The shares had gained as much as 18.5% to 194,900 won earlier in the day, their highest since Aug. 30, 2022.

ADDITIONAL MEASURES FOR SHAREHOLDERS

EV battery makers’ stocks have been popular among investors given the rapid growth in the global eco-friendly automobile sector. Its larger rival LG Energy Solution Ltd., the world’s No. 2 EV battery maker, became the country’s second-largest company by market capitalization after it went public in January 2022.

SK Innovation, the energy and chemical unit of South Korea’s second-largest conglomerate SK Group, considered further steps to bolster shareholder value with SK On’s listing.

“When we work on SK On’s IPO, we will provide SK Innovation’s shareholders with chances to secure SK On stock certificates and mull sharing parts of our investment profits with shareholders if the IPO succeeds,” Kim said, referring to the initial public offering.

“We also plan to consider measures to share a portion of the profit from the sale of existing shares with shareholders through special dividends.”

SK Innovation has yet to decide on when SK On is listed.

“We must do it when we secure sufficient profit and stability,” he said, reiterating its earlier plan to seek the IPO no earlier than 2025.

TURNAROUND

SK Innovation aims to focus on a turnaround of SK On, which has been in the red, to improve the subsidiary’s corporate value.

“SK On is expected to swing to an annual operating profit in 2024,” said SK Innovation CEO & President Kim Jun, referring to earnings before interest, taxes, depreciation and amortization. The battery unit logged an operating loss of 1.1 trillion won in 2022.

SK On plans to cut costs and raise product prices, CEO Jee Dong-seob said.

“We aim to minimize costs by reducing the initial stabilization period for new plants, which put pressure on profit improvement,” Jee said. “We will also reflect cost increases by inflation in the product selling prices.”

The battery maker is also set to develop low-cost materials and raise purchasing volumes from diversified suppliers for better cost competitiveness, Jee added.

Write to Seo-Woo Jang at suwu@hankyung.com
 
Jongwoo Cheon edited this article.