Home Business South Korea’s ‘M&A king’ SK Group pursues path away from fossil fuels

South Korea’s ‘M&A king’ SK Group pursues path away from fossil fuels


SK Group, South Korea’s third-biggest firm, has vowed to finish all new oil and gasoline investments abroad and slash its carbon emissions by two-thirds, because it plots a change away from fossil fuels.

The U-turn by one Asia’s prime producers of oil, pc chips and electrical automobile batteries is a victory for worldwide buyers and environmental activists, who’ve sharpened their criticism over how Asia’s corporates reply to local weather change.

The transfer, spearheaded by SK’s chairman and largest shareholder Chey Tae-won, can also be emblematic of how the acquisitive Korean group is stepping up its problem to the nation’s main chaebol, the family-owned conglomerates that dominate the financial system.

Mr Chey has ordered a sweeping readjustment of SK’s portfolio to be accomplished inside the subsequent three years. This can embody carving off carbon-intensive companies and doubling down on the corporate’s multibillion-dollar bets throughout EVs, pc chips, biotechnology and renewable vitality.

“The period of competing for scale is now behind us . . . We wish to be the perfect firm within the ESG realm,” Jang Dong-hyun, president of SK Holdings, which helps oversee SK’s 125 associates, instructed the Monetary Occasions in an interview.

SK’s pivot is driving M&A exercise and capital expenditure. In current weeks, the group bought Intel’s memory business for $9bn and spent $1bn to buy South Korea’s greatest waste disposal firm. SK Innovation, the oil refining unit more and more targeted on EV batteries, is spending $8bn constructing factories to serve carmakers within the US, China and Europe.

James Lim, an analyst at US hedge fund Dalton Investments, stated the technique was “bearing fruit” within the minds of some worldwide buyers. “SK is a number of steps forward of most different chaebol by way of future-oriented portfolio restructuring and ESG investments,” he stated.

Mr Jang stated the adjustments have been “inevitable”.

Rival Korean firms, together with Samsung and Kepco, the state-backed vitality group, have been panned by European pension funds and environmental teams for backing the coal industry.

Mr Chey, 59, has already overseen speedy progress on the family-owned SK Group since taking on the corporate after the loss of life of his father in 1998, through the Asian monetary disaster.

SK now generates greater than half of its revenues abroad, employs 100,000 folks and has made Mr Chey one among South Korea’s richest males.

SK carves off carbon-intensive businesses

SK’s group-wide belongings have elevated seven-fold to Won225.5tn ($202bn) final 12 months beneath Mr Chey’s management. Gross sales have quadrupled to Won139tn and internet revenue rose 80 instances to Won8tn.

One business chief described the corporate as a “kingdom constructed on M&As”.

The newest deal spurt has prompted options that SK is modelling itself on SoftBank, the Japanese telecoms group turned tech investor

SK bristles on the SoftBank comparability, insisting that its M&A method is centred on shopping for firms that enhance its present companies and carving off non-core models.

“Controlling the entire worth chain brings lots of advantages as you may create synergies by means of co-operation between models . . . It will increase your understanding of the entire enterprise or business, subsequently decreasing the dangers of failures,” stated Mr Jang.

SK pledges to overhaul portfolio with ESG drive

SK lacks the worldwide model recognition of rivals equivalent to Hyundai and LG. However the newfound consideration has revived uncomfortable questions over household management, corruption, political ties and mental property theft.

Mr Chey was convicted of accounting fraud and misappropriating firm funds in 2003 and 2014, respectively. His stints behind bars were cut short and he later obtained presidential pardons. SK declined to remark, noting accomplished authorized processes.

The corporate at the moment stands accused of illegally acquiring sensitive EV technology from Korean competitor LG Chem, in a dispute that threatens its $2.6bn funding in constructing factories in Georgia, the biggest single funding within the US state’s historical past. SK denies the claims.

The corporate has received reward from some buyers, together with Mr Lim, for shifting forward of different chaebol in abandoning a complex web of cross-shareholdings for a extra standard holding firm construction, in addition to bringing in outdoors, impartial administrators.

For some, nonetheless, the reputational stain from previous wrongdoing stays.

Kim Woo-chan, an economics professor at Korea College, stated: “The quantity of [alleged] fraud was a number of instances larger than Enron’s and Mr Chey was imprisoned twice for severe monetary crimes however he nonetheless controls the group — this might be unthinkable within the west.”

SK Group charts a turbulent rise from the ashes of Korean battle


Basis of Sunkyong Textiles


Acquisition of Korea Oil (now SK Innovation), South Korea’s prime refiner


Acquisition of Korea Cellular Telecom Service (now SK Telecom), South Korea’s main cellular operator


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


Acquisition of Hynix (now SK Hynix), the world’s second-largest DRAM producer


Acquisition of OCI Supplies (now SK Supplies), a South Korean semiconductor materials firm


Acquisition of LG Siltron (now SK Siltron), a South Korean silicon wafer producer


Acquisition of AMPAC, a US pharmaceutical contract producer


Acquisition of KCFT (now SK Nexilis), the world’s largest battery copper foil maker


Acquisition of EMC Holdings, South Korea’s largest waste disposal firm