On June 26, SK Chairman Chey and Roh Soh-yeong, director of Art Center Nabi, are appearing at the second hearing in the remand trial on property division held at the Seoul Central District Court.
SK Group Chairman Chey Tae-won will sell SK Inc. shares worth 944 billion won (about $696.7 million) in preparation for the division of property with Roh Soh-yeong, director of Art Center Nabi. The move is aimed at securing funds on the same scale as the property division amount set by the court. He chose a structure combining a sale to strategic investors and a price return swap, or PRS, to secure cash while minimizing the impact on the share price and the group’s control structure from a large block of shares entering the market.
SK said on October 2 in a disclosure on changes in shareholding that Chairman Chey, the largest shareholder, will sell 1,653,924 shares he holds. The stake amounts to about 2.3% of total issued shares.
Accordingly, the number of SK common shares held by Chairman Chey will fall from 12,975,472 shares to 11,321,548 shares. Actual share transactions are scheduled to begin from November 2, one month after the disclosure.
The total amount Chairman Chey will secure through the sale is 944 billion won ($696.7 million). That is the same scale as the property division amount set by the court in the remand trial of the divorce lawsuit with Roh.
Although Chairman Chey re-appealed the ruling, he is no longer contesting 700 billion won ($517.0 million) out of the total 944 billion won ($696.7 million), and is seeking a Supreme Court judgment only on the remaining 244 billion won ($179.7 million). The final property division amount has not yet been confirmed, but the share sale appears to be intended to prepare for funding needs that could reach as much as 944 billion won ($696.7 million).
An SK official explained, “This change in shareholding is intended to respond to the largest shareholder’s personal funding needs related to the property division lawsuit.”
Rather than selling the shares at once during regular trading, Chairman Chey decided to combine an after-hours block trade and PRS in order to reduce any shock to the share price that could arise from a large volume being released into the market at one time.
Of the total sale amount of 944 billion won ($696.7 million), 544 billion won ($400.7 million) will be sold to strategic investors. The acquiring party is known to be buying part of Chairman Chey’s holdings after comprehensively considering SK’s business competitiveness and medium- to long-term growth potential. The aim is to secure medium- to long-term investors and reduce any burden that may arise in the market.
The remaining 400 billion won ($294.6 million) will be sold to securities firms through a PRS structure. PRS is a structure in which the contracting parties settle profits and losses based on future changes in SK’s share price. Chairman Chey can secure cash by selling shares while continuing to maintain an economic interest for a certain period in any increase in SK’s corporate value.
SK said the focus of the share sale was to minimize the effect of Chairman Chey’s personal funding needs on the stability of the group’s management and the share price.
Once the transaction is completed, Chairman Chey’s stake will decline from 17.8% to 15.5%. Including specially related persons, the stake will also fall from 25.2% to 22.9%.
Based on voting shares, Chairman Chey’s stake will decline from 23.9% to 20.8%, while the stake including specially related persons will fall from 33.5% to 30.5%.
Although the ownership stake will decline, Chairman Chey’s status as the largest shareholder will remain unchanged after the transaction. The company said the impact of the sale on SK’s governance structure or management control is expected to be limited for now, as the voting stake including specially related persons will still stand at 30.5%.
SK Group said, “The largest shareholder will continue to focus on responsible management and enhancing the corporate value of SK Inc., and SK Inc. will also consistently pursue its existing growth strategy, investment plans, and shareholder value enhancement policies.”
