Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

SK Innovation: To Split SK Battery & SK E&P Business Units

SK Innovation's Unusual Attempt to Change the Articles of Incorporation for Stock Dividends

Continuing Outperformance & Closing the Gaps of Preferred Vs Common Shares in Korea

SK Innovation Battery Spinoff: What's Known at This Point

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<h2>Split overview</h2><p>SK Innovation held a board meeting today and announced that it had decided to spin out (physical division) the battery business and the petroleum development (E&amp;P) business, respectively.</p><div class="content-highlight"><p><strong>The new corporations 'SK Battery Co., Ltd. (tentative name)' and 'SK E&amp;P Co., Ltd. (tentative name)' are scheduled to be officially launched on October 1 after getting shareholder approval on September 16.</strong></p></div><p>After the split, there will be three companies in total. SK innovation will remain as a listed corporation, which plans to conduct R&amp;D, business development, and M&amp;As as a holding company. The two new companies will become unlisted corporations. An overview of each company is as follows.</p><table class="table table-striped"><tbody>
<tr><td colspan="4" style="width: 25%;">Company overviews</td></tr>
<tr>
<td style="width: 25%;">Type</td>
<td style="width: 25%;">Surviving corporation</td>
<td style="width: 25%;">Spinoff company 1</td>
<td style="width: 25%;">Spinoff company 2</td>
</tr>
<tr>
<td style="width: 25%;">Name</td>
<td style="width: 25%;"><strong>SK Innovation Co., Ltd.</strong></td>
<td style="width: 25%;"><strong>SK Battery Co., Ltd.</strong></td>
<td style="width: 25%;"><strong>SK ENP Co., Ltd. </strong></td>
</tr>
<tr>
<td style="width: 25%;">Business area</td>
<td style="width: 25%;">All businesses except those subject to the spin-offs that are transferred to the new companies according to the spin-off plan</td>
<td style="width: 25%;">Battery business, including secondary battery business, e-mobility business, and ESS business</td>
<td style="width: 25%;">Overseas E&amp;P business and LNG-related businesses</td>
</tr>
<tr><td colspan="4" style="width: 25%;">Source: DART</td></tr>
</tbody></table><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/222/019/original/Screen+Shot+2021-08-03+at+10.39.14+PM.png?1628044771" class="editor-image img-responsive" data-smartkarma-image-id="222019"></figure><div class="content-highlight"><p><strong>This split is a physical division (or a simple spinout) that SK Innovation owns 100% of the new corporations. Therefore, a split ratio is not calculated.</strong></p></div><p>The following are the financials of each company as of March 31, 2021. More debt was transferred to SK Battery than initially expected. It is evident that SK Innovation intends to utilize the financing through the listing of SK Battery as a recapitalization of the entire company.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Financials"}'>Financials</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Name"}'>Name</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Innovation Co., Ltd."}'>SK Innovation Co., Ltd.</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK Battery Co., Ltd."}'>SK Battery Co., Ltd.</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"SK ENP Co., Ltd."}'><div><div>SK ENP Co., Ltd.</div></div></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1Q21 assets"}'>1Q21 assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15880.741732131}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩15,880.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":4630.887470696}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩4,630.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":771.093058802}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩771.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1Q21 liabilities"}'>1Q21 liabilities</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2054.321132037}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩2,054.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2504.424587866}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩2,504.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":96.702765349}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'>₩96.7B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1Q21 equity"}'><strong>1Q21 equity</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":13826.420600094}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩13,826.4B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2126.46288283}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩2,126.5B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":674.390293453}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩674.4B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"FY2020 sales"}'><strong>FY2020 sales</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2156.034428388}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩2,156.0B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1592.944329042}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩1,592.9B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":59.268989295}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}'><strong>₩59.3B</strong></td>
</tr>
<tr><td colspan="4" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table><p>The future schedule is as follows. Since this event is a simple physical division, minority shareholders are not entitled to stock appraisal rights. However, they are granted the right to object to this division in shareholders' meeting, and the extraordinary general meeting is scheduled for September 16.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Schedule"}'>Schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Board resolution"}'>Board resolution</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44411}' data-sheets-numberformat='{"1":5,"2":"mm. dd","3":1}'>08. 03</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Shareholder meeting"}'><strong>Shareholder meeting</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44455}' data-sheets-numberformat='{"1":5,"2":"mm. dd","3":1}'><strong>09. 16</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Split record date"}'>Split record date</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44470}' data-sheets-numberformat='{"1":5,"2":"mm. dd","3":1}'>10. 01</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: DART"}'>Source: DART</td></tr>
</tbody>
</table>

Split overviewSK Innovation held a board meeting today and announced that it had decided to spin out (physical division) the battery business and the petroleum development (E&amp;P) business, respectively.The new corporations 'SK Battery Co., Ltd. (tentative name)' and 'SK E&amp;P Co., Ltd. (tentative name)' are scheduled to be officially launched on October 1 after getting shareholder approval on September 16.After the split, there will be three companies in total. SK innovation will remain as a listed corporation, which plans to conduct R&amp;D, business development, and M&amp;As as a holding company. The two new companies will become unlisted corporations. An overview of each company is as follows.
Company overviews

Type
Surviving corporation
Spinoff company 1
Spinoff company 2


Name
SK Innovation Co., Ltd.
SK Battery Co., Ltd.
SK ENP Co., Ltd. 


Business area
All businesses except those subject to the spin-offs that are transferred to the new companies according to the spin-off plan
Battery business, including secondary battery business, e-mobility business, and ESS business
Overseas E&amp;P business and LNG-related businesses

Source: DART
This split is a physical division (or a simple spinout) that SK Innovation owns 100% of the new corporations. Therefore, a split ratio is not calculated.The following are the financials of each company as of March 31, 2021. More debt was transferred to SK Battery than initially expected. It is evident that SK Innovation intends to utilize the financing through the listing of SK Battery as a recapitalization of the entire company.







Financials

Name
SK Innovation Co., Ltd.
SK Battery Co., Ltd.
SK ENP Co., Ltd.


1Q21 assets
₩15,880.7B
₩4,630.9B
₩771.1B


1Q21 liabilities
₩2,054.3B
₩2,504.4B
₩96.7B


1Q21 equity
₩13,826.4B
₩2,126.5B
₩674.4B


FY2020 sales
₩2,156.0B
₩1,592.9B
₩59.3B

Source: DART

The future schedule is as follows. Since this event is a simple physical division, minority shareholders are not entitled to stock appraisal rights. However, they are granted the right to object to this division in shareholders' meeting, and the extraordinary general meeting is scheduled for September 16.





Schedule

Board resolution
08. 03


Shareholder meeting
09. 16


Split record date
10. 01

Source: DART



SK Innovation Split Overview & Implications