Seoul: SK Innovation Co., South Korea's leading oil refiner, has revealed a comprehensive business reorganization plan, which includes the merger of two of its electric vehicle (EV)-related affiliates. This move comes in response to a downturn in EV sales, as the company aims to streamline operations and boost financial performance.
According to Yonhap News Agency, SK Innovation's EV battery manufacturing arm, SK On Co., is set to merge with SK Enmove Co., a specialist in EV lubricants and thermal management solutions. This merger, slated to take effect on November 1, is designed to foster synergies in the electrification sector and enhance cost efficiency in logistics, as stated by SK Innovation Executive President Jang Yong-ho during a press conference.
As part of its restructuring efforts, SK Innovation and its affiliates are targeting a capital raise of 8 trillion won (approximately US$5.8 billion) through share and bond sales. Executive President Jang highlighted that these efforts are directed towards improving earnings before interest, taxes, depreciation, and amortization (EBITDA) and reducing debt, with the overarching goal of achieving top-tier financial soundness.
The company plans to issue 18 million common shares at 111,000 won each, raising 1.99 trillion won to be used primarily for debt repayment. SK Innovation expects to secure 3 trillion won of the total capital by the end of the year. In parallel, SK On and SK ie technology Co. (SKIET) aim to raise an additional 2 trillion won and 300 billion won, respectively, through share offerings.
To consolidate its control over SK On, SK Innovation will acquire 1.08 million shares from financial investors for 3.58 trillion won on October 31, increasing its stake in the battery manufacturer from 86.98 percent to 90.3 percent.
In addition to the fundraising plan, SK Innovation also intends to divest non-core assets, targeting a debt reduction of more than 1.5 trillion won within the year. Through these restructuring measures, the company aims to achieve an EBITDA of 20 trillion won by 2030 while reducing its debt to below 20 trillion won.
Last year, SK Innovation merged with SK E and S Co. in a move to bolster its energy portfolio by integrating its oil and battery businesses with SK E and S's liquefied natural gas (LNG) and renewable energy operations. This merger was part of broader restructuring efforts by SK Group, South Korea's second-largest conglomerate, amid prolonged economic challenges and uncertainties in the petrochemical sector, as well as the so-called EV "chasm."
The global EV market is experiencing a stagnation phase, often referred to as a chasm, which represents a period of slowed growth preceding the widespread adoption of fully electric vehicles.