SK Corp to split as adopts holding co. structure

SEOUL, April 11 Wed Apr 11, 2007 10:52am BST

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SEOUL, April 11 (Reuters) - South Korea's top refiner SK Corp. (003600.KS) said on Wednesday it would split into two firms as it adopts a holding company structure in July to reorganise cross-shareholdings among the many SK Group affiliates.

SK Corp., valued at 11.96 trillion won ($12.8 billion) at Wednesday's closing share price, will be divided into two firms.

The bigger entity will be an operating company specialising in the energy business. The smaller will be a holding company which will incorporate SK's life science business and the shares of its affiliates whose activities range from chemicals to construction to telecoms.

The holding company, to be tentatively named SK Holdings Co. will keep SK Corp's existing listing on the Korea Stock Exchange. The operating company will be renamed SK Energy-Chemical Co., Ltd. and will be newly listed. Dates were not given.

Shares in SK Corp. will be suspended from June 28. A date for the listing's resumption was unknown.

The split ratio of operating company to holding company is 71:29. Existing SK Corp. shareholders will receive shares of each company based on the split ratio of net assets, it said.

Fitch Ratings said the transaction is expected to reduce SK's net debt by 1.95 trillion won and that the simplification of the ownership structure should limit risk from affiliates that are not directly linked to SK core business.

"Fitch has historically viewed SK's exposure to...risk from troubled affiliates as a negative rating factor and therefore takes a positive view of the announced reorganisation," said Mikyung Kwon, director in Fitch's Asia-Pacific energy and utilities team.

Despite reforms brought in after the 1997-98 Asian financial crisis, some conglomerates are still run like family businesses, shifting money among group companies and using complex share ownership networks to control their businesses.

In 2003, SK Corp. chairman Chey Tae-won got a three-year jail term for a $1.2 billion accounting scandal and illegal stock dealings at subsidiary SK Global, now renamed as SK Networks (001740.KS), though the sentence was suspended in 2004.

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