Activist fund again urges SK Chem to sell SK Bioscience stake

An activist fund has again urged South Korea’s SK Chemicals to sell part of its stake in SK Bioscience or buy back treasury shares and cancel them, saying the vaccine maker’s corporate value has not been fully reflected in the parent company’s share price.

Singapore-based hedge fund Metrica Partners Pte. said that it may call an extraordinary shareholder meeting, if necessary, to push for the measures to raise shareholders’ returns.

The activist fund said that SK Chemicals’ plans such as a stock bonus issue announced in October to appease shareholders fell short of their demands, adding “they fail to address the main issue – that is, the company’s excessively large stake in SK Bioscience.”

“Metrica, therefore, calls on the board and management of SK Chemicals to launch a formal strategic review within the next two months, aimed at providing shareholders with the opportunity to realize the true and fair value of their investment in the company,” it said in another letter sent on Dec. 15 to SK Chemicals’ board of directors. This letter comes three months after it made a similar request in September.

Metrica urged SK Chemicals to consider cutting its 68.43% stake in SK Bioscience to 50.1% and paying a special dividend with the proceeds.

In October, SK Chemicals announced measures for shareholders such as a bonus issue, or 0.5 of a share apiece, and to return 30% of its annual net profit to them for the next three years starting from this year. But its co-chief executive Jeon Kwang-hyun last month said the company was not mulling reducing its stake in SK Bioscience in the immediate future although it will look at the stake sale option if needed.

EXTRAORDINARY GENERAL MEETING

Metrica said it has received messages of support from hundreds of SK Chemicals shareholders, both retail and institutional, Korean and non-Korean, since September. Several parties asked Metrica to call an extraordinary general meeting (EGM) in order to give all shareholders – including those representing the 65% of shares that are not affiliated with the SK Group – an opportunity to express their views directly on the requests, for example via a resolution to elect new directors that would support them, according to the hedge fund.

Metrica told The Korea Economic Daily that it has recently been increasing its SK Chemicals stake, saying “our funds have attracted more inflows” without providing details. The activist fund held less than a 5% stake in SK Chemicals as of early September.

“While we haven’t disclosed our effective stake publicly, we have planned our campaign such that if an EGM eventually becomes necessary, we are confident that we will be in a position to call for one,” wrote Metrica in a reply to an email from The Korea Economic Daily.

“SK Chemicals does not know the names of our fund entities, and in addition, most of our shares are held in our brokers’ names. SK Chemicals may not be aware of that,” it said.

Write to Sulgi Lee at surugi@hankyung.com
Jongwoo Cheon edited this article.