SK Square to buy back $72 mn shares amid Palliser's value-up push

SK Square Co., the investment arm of South Korea’s No. 2 conglomerate SK Group, announced shareholder-friendly measures on Thursday, in response to activist fund Palliser Capital’s push to boost corporate value.

SK Square will retire 100 billion won ($72 million) in shares it bought back between late 2023 and April of this year and repurchase an additional 100 billion won worth of shares within the next three months, said the company.

It also unveiled the goal of boosting its share price to the level of its book value or above by 2027, compared with the 0.73 multiple as of the end of September. It is aiming for a return on equity above its cost of equity based on 2025 to 2027.

SK Square has entered into talks with Palliser, which has secured more than a 1% stake in the SK Group unit, to discuss shareholder-friendly measures.

The London-based fund requested an additional share repurchase following the 100 billion won buybacks completed by April. It also wanted SK Square to lower its capital costs by using more debt.

SK Square, an intermediary holding company of SK Group, also pledged to narrow its discount to net asset value (NAV) below 50% by 2027, compared with 65.8% as of the end of September.

It is the first holding company in South Korea to set a target on its NAV discount rate, which will serve as a yardstick for its top management’s performance evaluation and compensation.

Palliser argued SK Square traded at a sharp discount and failed to price in the soaring value of SK Hynix Inc., worth around $20 billion. SK Square is the largest shareholder in the world’s No. 2 memory chip maker with about a 20% stake.

SK Square has also pledged to add independent directors and allocate capital under clear guidelines regarding investment returns while turning around major portfolio companies in distress.

SK Square was spun off from South Korea’s top mobile carrier SK Telecom Co. in 2021.

“To increase corporate value, we will communicate with shareholders through the board of directors and implement optimal capital allocation and predictable shareholder returns,” Han Myung-jin, chief executive of SK Square, said in a press release.

"We will continue to strengthen our portfolio companies' profitability and make new investments in promising future areas," he added.

On Thursday, its share price closed little changed at 80,400 won, still below its all-time high of 109,000 won etched on July 12.

Write to Seung-Woo Lee at leeswoo@hankyung.com
 


Yeonhee Kim edited this article.