South Korea’s second-largest conglomerate, SK Group (034730.KS), said Monday it is considering selling some of its assets in Southeast Asia and reinvesting them in other companies in countries in the region, including Vietnam.
As it continues to invest in strategic sectors, SK Group hopes to raise funds through asset sales to avoid an economic slowdown, Reuter reported.
According to the news source, SK Group is considering selling some of its assets in Vietnam and Malaysia owned by its investment vehicle SK South East Asia Investment Pte. Ltd. gird themselves for deteriorating economic conditions, people familiar with the matter said on Sunday.
The potential asset sale comes at a time when major Korean companies are hoarding cash while refraining from aggressive investment in new projects amid bleak business prospects for next year.
SK South East Asia Investment has a 6.1% stake in Vietnam’s largest conglomerate Vingroup JSC, a 9.5% stake in Vietnam’s No. 2 conglomerate Masan Group, a 14.5% stake in retail chain Pharmacity, a 54% stake % in pharmaceutical company Imexpharm Corp., a 16.3% stake in retailer VinCommerce, a 4.9% stake in The CrownX Corp., and an unidentified stake in BigPay, a fintech unit of Malaysia’s AirAsia Group Bhd.
An SK official said no concrete decisions have been made yet. Details such as the companies and size of stakes up for grabs will be determined later, he added.
PREMPTIVE MOVEMENT
“SK is not in a financial crisis. It just wants to pre-emptively secure funds to prepare for deteriorating economic conditions,” said an investment banking industry source.
Since its launch in 2018, Singapore-based SK South East Asia Investment has spearheaded the group’s investment activities across several business sectors in Southeast Asia.
Five SK Group subsidiaries – SK Inc., SK E&S Co., SK Hynix Inc., SK Telecom Co. and SK Innovation Co. – have each deposited $200 million into the investment vehicle for a total paid-in capital of $1 billion.
SK South East Asia Investment, in partnership with Korean state pension fund National Pension Service, has spent a whopping 3 trillion won ($2.34 billion) to buy stakes in the seven Vietnamese and Malaysian companies.
Last month, SK Group Chairman Chey Tae-won said at a corporate meeting that survival is now a top priority over profit and managerial efficiency, urging CEOs of group affiliates to hoard cash in preparation for an emergency.
Outstanding net debt with SK Inc., the holding company of SK Group, rose to 10.87 trillion won on a consolidated basis at the end of the third quarter from 6.88 trillion won at the end of 2018.
As part of group-wide fundraising efforts, SK On Co., a battery manufacturer, raised 1.32 trillion won in mid-December by issuing convertible preferred shares (RPS) to Korea Investment Private Equity and others private equity firms (PEFs).
SK E&S raised 1.38 trillion won by issuing 735 billion won of redeemable convertible preferred stock (RCPS) in Busan City Gas Co. and the sale of the headquarters for 633 billion won.
SK Group is said to have gained a whopping $4 trillion in emergency funds so far this year.
But the group is known for investing heavily in future growth engines such as semiconductors, commodities and artificial intelligence.
Some of the proceeds from the sale of stakes in the Vietnamese and Malaysian companies could be reinvested in promising companies in Southeast Asia, sources said.
