SK Group to combine units as billionaire Chey cements grip from behind bars

SEOUL (Bloomberg) - SK Group will combine two units as billionaire Chey Tae Won cements control of South Korea's third-largest private conglomerate from a prison cell, where he's serving a sentence for embezzlement. Shares fell.

SK C&C Ltd., a provider of information-technology services, will acquire SK Holdings Co. in an all-stock deal, according to a filing Monday. The combined company, spanning businesses from energy to semiconductors, will have total assets of about 13.2 trillion won (S$16.41 billion), they said in an e-mailed statement.

Chey will become the largest shareholder of the combined company as South Korea pushes for family-run conglomerates, known as chaebol, to revamp complicated ownership structures and boost transparency at the businesses that dominate the nation's corporate landscape. Samsung Group combined units and simplified businesses after President Park Geun Hye's government banned the creation of new cross-shareholdings and offered tax breaks for restructuring.

"The move will help SK Group to straighten its governance structure by boosting major shareholder Chey Tae Won's influence," said Nam Dong Woo, head of equities at Eastspring Asset Management Korea Co. in Seoul, a South Korean arm of Prudential Plc. "This will promote other industrial groups to speed up their governance structure overhaul and head to holdings company structures, too."

SK Holdings fell 0.6 per cent to 175,000 won as of 12:16 p.m. in Seoul. SK C&C fell 2.3 per cent to 232,000 won.

Chey, 54, was sentenced to four years in prison in 2013 for embezzling corporate funds to cover personal investment losses. He has a net worth of US$4.4 billion, according to the Bloomberg Billionaires Index.

SK Group comprised more than 80 companies and generated sales of 165.5 trillion won in 2014, according to South Korea's Fair Trade Commission. The chaebol includes SK Hynix, a supplier of memory chips to Apple; refineries; and the country's biggest wireless carrier.

Chey, who will become the largest shareholder of the combined company, currently has a 33 per cent stake in SK C&C, which in turn owns about 32 per cent of SK Holdings common stock.