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By Anna J. Park
Ahead of SK Group's restructuring plan expected to be announced later this week, the stock price of SK Telecom (SKT) ― Korea's largest mobile operator ― soared 6.01 percent Tuesday to set a 52-week record after closing trading at 300,000 won ($266.4).
The share price surge was largely attributed to SKT's imminent announcement of an equity spinoff, whereby it will become two companies. According to industry insiders, SKT is likely to hold a town hall meeting as early as Wednesday to explain the plan to split the firm into two parts; one responsible for the firm's traditional business and the other to take control over thesemiconductor (SKT is the largest shareholder in SK hynix) and e-commerce businesses.
Although the SKT's specific plan hasn't yet been revealed to the public, the company will continue its traditional telecommunications business, while making internet-access provider SK broadband a direct affiliate. The other company, responsible for semiconductors and new businesses such as e-commerce, will have SKT's other subsidiaries under its roof, including e-commerce subsidiary 11Street, mobile app One Store, mobility platform T Map and security company ADT Caps.
It is estimated that the split will be done in an equity spinoff, where shareholders can continue to own shares of both entities at the same proportion, given that the firm's CEO Park Jung-ho commented that the restructuring plan will be conducted in a way that will bring the biggest benefit to shareholders.
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| The headquarters of SKT located in central Seoul / Korea Times file |
Restructuring plan to benefit stock prices of both SKT and SK hynix
One of the key reasons that the company plans to conduct the spin-off or equity spinoff is to maximize the firm's corporate value in the market, as well as to promote further growth of its affiliates.
Currently, SKT is the largest shareholder of semiconductor manufacturer SK hynix holding a 20.1 percent stake in the firm. As SKT is a subsidiary of the SK Group ― the holdings company which owns a 26.8 percent stake ― SK hynix becomes an affiliate company under the current structure, which has been an obstacle for the global chipmaker's growth.
This is because the country's fair trade act states that a company that embodies such a structure is required to own 100 percent of stake when the firm aims to engage in M&A deals. Although SK hynix is the country's second largest market cap company in Korea, with over 100 trillion won in market value, SK's conglomerate structure has prevented it from expanding further.
"SK Telecom's market cap is estimated at around 25 trillion won, while SK hynix's market value stood at 100 trillion won; we hope to change the corporate restructure so that the our assets could be fully recognized," said Park Jung-ho, CEO of SKT during shareholders' meeting held last month.
SK Group shares were ranked as local institutional investors' top picks for net-purchasing during the past week on the news. Market experts also say SKT subsidiaries' corporate value could also be boosted.
"This will provide an opportunity for SKT's subsidiaries, including SK hynix, One Store, ADT Caps, 11Street, SK broadband, to receive reasonable market assessments, while they have remained in SKT's shadow so far," Choi Gwan-soon, an analyst at SK Securities, wrote in a report. "The total market cap of both entities, after the split, is likely to increase from the current value," he added.
SK hynix's stock price also finished at 139,500 won on Tuesday's close, 1.45 percent higher than the previous session. SK Group's stock also rose by 1.35 percent, finishing at 299,500 won, continuing a winning streak for the past four trading sessions. SKT aims to complete the restructuring plan within this year, if it gets approval at both the board of directors and shareholders meetings.
