The Financial Times, 12 April 2007
SK Corp, South Korea's largest refiner, said on Wednesday it would set up a holding company in July in an important step to improve corporate governance.
The Korean company's board of directors approved a plan to split SK Corp into a holding company and an operating company to help its subsidiaries focus on core businesses to promote shareholder value.
SK Corp plans to reorganise seven main affiliates including SK Telecom and SK Networks under the new holding company, expected to be named SK Holdings. It will eliminate cross-shareholdings over the next two years.
SK Corp - a de facto holding company for SK Group, South Korea's third-largest conglomerate - was once considered a symbol of bad corporate governance, following a $1.2bn accounting fraud at affiliate SK Network. The plan to split the company, however, underlines SK Corp's determination to make management more transparent and shareholder oriented.
"The new structure will reinforce the company's already advanced corporate governance and enable subsidiaries to fully concentrate on core businesses to promote shareholder value," the company said on Wednesday.
Under the new structure, the holding company will become an investment company, which serves as the group's incubator for new businesses.
The operating company, which was tentatively named SK Energy-chemical, will focus on the group's energy, chemical, exploration and production businesses. Subsidiaries including SK Telecom and SK Networks will continue to operate under independent management structures, SK said.
Wednesday's announcement was SK's first significant move to improve corporate governance and boost shareholder value, two years after its acrimonious management battle with Sovereign Asset Management, a Dubai-based investment fund.
Sovereign led a two-year battle to oust SK's management in 2004-05 as Chey Tae-won, SK's chairman, was convicted for accounting fraud at SK Networks. But the fund has divested its SK holdings after the high-profile but ultimately unsuccessful attempt.
At that time, Sovereign blasted SK for poor corporate governance while praising LG Group as a "model chaebol" with better corporate governance.
Investors welcomed SK's move, boosting its shares 4.73 per cent to Won93,000 on Wednesday.
Source: The Financial Times
