South Korea’s second-largest conglomerate SK Group (034730.KS) said on Monday it is considering selling some of its assets in Southeast Asia and reinvesting in other businesses in countries in the region, including Vietnam.
While continuing investment in strategic sectors, SK Group hopes to secure funds via asset sales to gird for an economic slowdown, the 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. to gird for worsening economic conditions, people familiar with the matter said on Sunday.
The possible asset sales come at a time when Korea’s big companies are hoarding cash while refraining from aggressive investments in new projects amid a gloomy business outlook for next year.
SK South East Asia Investment holds 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 yet been made. Details such as the companies and the size of the stakes up for grabs will be determined later, he added.
PREEMPTIVE MOVE
“SK is not in a financial crunch. It just wants to preemptively secure funds to prepare for worsening 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 in various business sectors across Southeast Asia.
Five SK Group affiliates – SK Inc., SK E&S Co., SK Hynix Inc., SK Telecom Co. and SK Innovation Co. – have each chipped in $200 million in the investment vehicle for a total paid-in capital of $1 billion.
SK South East Asia Investment, in partnership with Korea’s state pension fund National Pension Service, has spent as much as 3 trillion won ($2.34 billion) to purchase stakes in the seven Vietnamese and Malaysian companies.
Last month, SK Group Chairman Chey Tae-won said at a company meeting that survival now takes top priority over profits and management efficiency, urging chief executives of group affiliates to hoard cash in preparation for an emergency.
The outstanding net borrowing at SK Inc., the holding company of SK Group, ballooned to 10.87 trillion won on a consolidated basis at end of the third quarter from 6.88 trillion won at the end of 2018.
As part of groupwide efforts to secure funds, SK On Co., a battery maker, in mid-December raised 1.32 trillion won by issuing redeemable preferred shares (RPS) to Korea Investment Private Equity and other private equity firms (PEFs).
SK E&S raised 1.38 trillion won through the issue of 735 billion won worth of redeemable convertible preferred shares (RCPS) in Busan City Gas Co. and the sale of its headquarters for 633 billion won.
SK Group is said to have secured as much as 4 trillion won in emergency funds so far this year.
But the group is known to be heavily investing in future growth engines such as semiconductors, raw materials 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.
