SK Innovation will absorb its battery separator subsidiary, SK IE Technology (SKIET). Amid a temporary slowdown in electric vehicle demand, SKIET has faced poor performance, prompting the parent company to end its separate corporate structure and integrate the business to reduce financial burdens and improve operational efficiency.
On August 25, SK Innovation and SKIET held board meetings and approved the merger proposal.
The merger will proceed with SK Innovation absorbing SKIET. The surviving company, SK Innovation, will conduct a small-scale merger, while the dissolved company, SKIET, will follow standard merger procedures. SK Innovation will issue new shares to distribute to SKIET shareholders.
The merger ratio is set at 1 to 0.1174540, meaning that for each common share of SKIET, approximately 0.117 shares of SK Innovation will be allocated.
Both companies plan to finalize the merger on January 1, 2027, after obtaining approval from the SK Innovation board and SKIET shareholders at their meetings on November 24. The new shares issued by SK Innovation will be listed on January 18, 2027. Since this is a small-scale merger, approval will be obtained through board resolution without a separate shareholders' meeting.
The merger is driven by challenging business conditions surrounding SKIET. Established in April 2019 through a spin-off from SK Innovation's materials business, SKIET was listed on the stock market in May 2021. While it initially grew by focusing on lithium-ion battery separators for electric vehicles, it has struggled with profitability due to a slowdown in the electric vehicle market, delayed demand recovery in key markets like North America, and intensified price competition with Chinese firms.
In fact, SKIET recorded operating losses of 291 billion won in 2024 and 246.4 billion won last year, with a further operating loss of 63.5 billion won in the second quarter of this year.
Additionally, a stock price return swap (PRS) agreement made during a 300 billion won capital increase last year has been cited as a financial burden for SK Innovation. In August 2022, SKIET raised 300 billion won through a third-party allocation of new shares, and SK Innovation entered into a PRS agreement with financial investors based on SKIET shares as the underlying asset. The contract expires in 2028, and if SKIET's stock price falls below the level at the time of the agreement, SK Innovation must settle the difference with investors.
Recently, SKIET's stock price has significantly fallen below the issuance price of 28,600 won during the capital increase, increasing related burdens. In the first quarter of this year, SK Innovation recognized a valuation loss of 37.9 billion won related to stock options, which included the PRS agreement made during the funding process for SKIET and SK On. Consequently, there are concerns in the market that if SKIET's stock price recovery is delayed, the valuation loss could translate into actual cash burdens.
Following the merger, SK Innovation plans to reduce overlapping costs and financial expenses related to the separator business while combining research and development capabilities to enhance competitiveness. The company also aims to expand its business scope beyond electric vehicle separators to include separators for energy storage systems (ESS).
An SK Innovation official stated, "Through the merger, we aim to strengthen financial stability and streamline our business structure, thereby enhancing the long-term competitiveness of the separator business. We will do our utmost to ensure that this merger leads to a recovery in business competitiveness and an increase in shareholder value."
* This article has been translated by AI.
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