Board approves merger on Wednesday

Integration to unify propane procurement and propylene production

Move aims to boost operational and financial efficiency amid global supply glut

Merger follows Ulsan power plant asset monetization in portfolio overhaul

SK Gas headquarters. [Provided by SK Gas]
SK Gas headquarters. [Provided by SK Gas]

SK Gas will absorb its propane dehydrogenation (PDH) subsidiary SK Advanced through a merger.

The move aims to maximize operational and financial efficiency by folding SK Advanced into SK Gas, as a prolonged global propylene supply glut — driven largely by China — has weighed on the subsidiary's finances. The merger push follows the monetization of Ulsan GPS (Gas Power Solution) power plant assets in June, signaling that SK Gas is accelerating its business portfolio optimization.

SK Gas said its board met Wednesday and approved a resolution to sign a merger agreement with SK Advanced. SK Advanced is a wholly owned subsidiary of SK Gas. The merger will proceed without issuing new shares, leaving existing SK Gas shareholders' stakes unchanged.

At the heart of the deal is the integration of propane procurement and supply with propylene production under a single management structure. SK Gas has spent more than four decades building a global network and trading capabilities, securing competitively priced propane and stable shipping infrastructure from overseas. SK Advanced uses that propane (C₃H₈) in a PDH process — stripping hydrogen (H) to produce propylene (C₃H₆), a basic petrochemical feedstock.

SK Gas had spun off the PDH business unit to establish SK Advanced in 2014 as part of an expansion drive. Since then, a massive scale-up of production capacity in China has prolonged the propylene supply glut, pushing SK Advanced into operating losses for four consecutive years starting in 2022. The subsidiary returned to operating profit in the first quarter of this year, but analysts attribute the improvement to a temporary price increase caused by supply disruptions stemming from the US-Iran conflict.

Against that backdrop, SK Gas decided to pursue the merger to build an integrated value chain spanning propane procurement and supply through to propylene production and sales. The company said integrating the two entities under one management structure was the most effective way to strengthen competitiveness and efficiency. After the merger, decision-making across raw material procurement, product manufacturing and sales will be unified.

Through the integration, SK Gas plans to strengthen raw material procurement competitiveness, improve operational efficiency and sales capabilities, and consolidate financing and financial management to reduce funding costs and generate financial synergies through more efficient capital deployment.

"This merger is an extension of the portfolio optimization that began with the Ulsan GPS asset monetization in June," an SK Gas official said. "We will connect our assets from LPG to LNG and optimize the value of our existing businesses and assets." The official added that the company plans to "continuously explore new growth opportunities at the same time."


keg@heraldcorp.com