Merger briefing held Wednesday

SKIET to return to parent five years after spin-off amid EV slump

Board resolution set for Nov. 24; merger to take effect Jan. 1

SK Group's Seorin Building in Seoul. [SK Group]
SK Group's Seorin Building in Seoul. [SK Group]

SK Innovation said Wednesday it aims to return to profitability within two years of absorbing its battery separator subsidiary SK IE Technology.

Kim Yun-ae, head of SK Innovation's management strategy division, made the pledge at a merger briefing held that morning. "If the electric vehicle market — our upstream industry — recovers and related policies turn favorable, the potential is even greater," she said.

SK IE Technology produces lithium-ion battery separators, a key material for EV batteries. The company was spun off from SK Innovation's materials business in 2019 but is now returning to its parent after five years as an independent entity, having posted annual losses of around 200 billion won ($145 million) as the EV market downturn dragged on.

SK Innovation said it expects little near-term improvement in SK IE Technology's performance as the EV market remains sluggish. "The fundamental cause of the losses is that the pace of electrification and demand from our major customers has deteriorated beyond expectations," Kim said. "Chinese separator rivals are expanding production capacity, intensifying price competition and driving an overall supply glut that is eroding profitability."

Through the merger, SK Innovation plans to first shore up its financial health. Seo Geon-gi, head of SK Innovation's finance division, said operating losses had accumulated to the point where SK IE Technology's capital needs had grown significantly. "If this situation continues, the risks of maintaining SK IE Technology as an independent entity could spread to the broader SK Innovation group and weigh on its corporate value," he said.

Seo said, however, the merger was unlikely to deal a serious blow to SK Innovation's financial position or shareholder value. "There may be a modest widening of SK Innovation's losses as SK IE Technology's results are consolidated," he said, "but the impact from merger synergies and post-merger integration efforts to improve earnings will be limited."

SK IE Technology is set to be folded into SK Innovation as a dedicated separator business unit. The integration is expected to combine SK Innovation's research and development capabilities with the separator operations and cut overlapping fixed and operating costs, boosting overall efficiency. SK Innovation also plans to expand its ESS separator business to improve profitability.

The two companies are scheduled to obtain merger approval at SK Innovation's board meeting and an SK IE Technology shareholder meeting on Nov. 24. The merger is set to take effect Jan. 1, with newly issued shares to be listed Jan. 18. The merger ratio is 1 to 0.11754540, meaning holders of one SK IE Technology common share will receive 0.11 SK Innovation common shares.


klee@heraldcorp.com