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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 high producers of oil, laptop chips and electrical automobile batteries is a victory for worldwide traders 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 throughout the subsequent three years. It will embody carving off carbon-intensive companies and doubling down on the corporate’s multibillion-dollar bets throughout EVs, laptop chips, biotechnology and renewable power.

“The period of competing for scale is now behind us . . . We need to be the very best 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 traders. “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 modifications have been “inevitable”.

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

Mr Chey, 59, has already overseen fast development on the family-owned SK Group since taking up the corporate after the demise of his father in 1998, through the Asian monetary disaster.

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

SK carves off carbon-intensive businesses

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

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

The most recent deal spurt has prompted recommendations 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 technique is centred on shopping for firms that enhance its present companies and carving off non-core models.

“Controlling the entire worth chain brings a variety of advantages as you may create synergies by way of co-operation between models . . . It will increase your understanding of the entire enterprise or trade, due to this fact decreasing the dangers of failures,” stated Mr Jang.

SK pledges to overhaul portfolio with ESG drive

SK lacks the worldwide model recognition of rivals reminiscent of 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 acquired 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 gained reward from some traders, together with Mr Lim, for shifting forward of different chaebol in abandoning a complex web of cross-shareholdings for a extra typical 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 critical monetary crimes however he nonetheless controls the group — this is able to be unthinkable within the west.”

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

1953

Basis of Sunkyong Textiles

1980

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

1994

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

2008

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

2012

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

2016

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

2017

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

2018

Acquisition of AMPAC, a US pharmaceutical contract producer

2019

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

2020

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

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