SK Group's corporate governance restructuring is expected to resurface next year. Hana Financial Investment said on Dec. 10 that a divorce lawsuit against SK chairman Chey Tae-won, which followed SK Holdings' massive treasury stock acquisition, could lead to a corporate governance change.
“There is a slim possibility of SK Group starting to restructure its corporate governance immediately,” said Kim Hong-sik, a researcher at Hana Financial Investment. Chey Tae-won may pay his wife, Roh So-young, director of the Art Center Nabi, compensations amounting to Roh’s stake in SK Holdings. The purchase of treasury shares cannot be regarded as a precautionary measure. "
"In the long term, more and more investors will rationally expect that Chey will seek to stabilize his management right by revamping the governance structure and purchasing treasury shares as he has to worry about a decline in the owner's stake in the long term,” Kim added.
Earlier, SK Holdings, the holding company of SK Group, decided to buy treasury shares amounting to 720 billion won (5 percent of all issued shares) in October. As a result, SK Holdings’ treasury shares will rise to 25.7 percent. SK Holdings explained that the stock purchase is designed to enhance shareholder value, but market watchers interpret it as a move to reorganize the group’s governance structure. This is because treasury stocks help the largest shareholder strengthen his control and voting rights in a merger and acquisition process.
In particular, Roh filed a lawsuit requesting a 42.29 percent (5,488,625 shares) of Chey’s 18.44 percent stake in SK Holdings. If Roh wins, Chey’s stake will fall to 10.64 percent, and Roh's stake will soar from 0.01 percent to 7.81 percent. Roh's stake will surpass that of chairman Chey’s sister Chey Ki-won (7.27 percent), chairwoman of the SK Happiness Sharing Foundation, and his younger brother Chey Jae-won (2.26 percent), senior vice chairman of SK Group. The combined stakes of shareholders friendly to chairman Chey currently stands at 29.64 percent.
"SK Group is unlikely to begin a governance overhaul in the first half of next year, but the situations will change in the second half or later." Kim said. “This is because SK Group will have to pay attention to the owner’s stake.”
Some analysts say that SK Telecom's recent reorganization had to do with possible changes in the group’s corporate governance. "SK Telecom’s main business was recently divided into the Mobile Network Operation (MNO) division and the New Biz division," said Ahn Jae-min, a researcher at NH Investment & Securities. "There will be a change in SK Group’s governance structure involving SK Telecom and its subsidiaries next year. SK Group is expected to generate positive effects through the change. The positive effects will include the listing of major companies in the New Biz division such as SK Broadband, 11STREET and ADT Caps to secure cash and invest it in new growth businesses.”
The passage of an amendment to the Fair Trade Act is also a key concern to SK Group. The amendment proposes that the minimum stakes that a holding company should have in affiliates be raised from the current 20 percent to 30 percent in case of a listed affiliate and from 40 percent to 50 percent for an unlisted affiliate.
“If the amendment to the Fair Trade Act is passed, holding companies will have to increase their equities in their sub-subsidiaries,” said Ahn Sang-hee, director of the Daeshin Corporate Governance Research Institute. “If the amendment fails to pass the Assembly, a discussion on making SK Telecom an intermediate holding company may resurface.”