[Edaily Reporter kyoungeun kim ] Hana Securities stated on the 27th that while it assesses SK Innovation(096770)has proactively mitigated the risk of default stemming from the #SKIET merger by absorption, it is necessary to establish specific guidelines to protect existing shareholders.

Yoon Jae-sung, an analyst at Hana Securities, stated in a report released that day, “Despite improvements in cash flow and financial structure driven by favorable market conditions in the refining and lubricant base oil sectors, expectations for increased shareholder returns will inevitably weaken if support for subsidiaries takes priority,” adding He emphasized, “It appears necessary to clearly set limits on additional financial support for SK On and SKIET and to establish specific guidelines for returning the profit increases resulting from favorable market conditions to existing shareholders through measures such as share buybacks, cancellations, and expanded dividends.”
On the 25th, SK Innovation announced, following a board resolution, that it would absorb SKIET through a small-scale merger. No new shares will be allocated for the 53.35% stake held by SK Innovation; only the 46.65% held by external shareholders will be exchanged for new shares. If the amount SKIET must pay to dissenting shareholders—resulting from the exercise of their right to demand the purchase of their shares—exceeds 350 billion won, the agreement may be terminated or the merger terms may be revised.
Analyst Yoon stated, “SKIET, currently operating as an independent entity, is facing a liquidity crisis severe enough to make it difficult to refinance debt and secure working capital,” adding, “Despite raising approximately 300 billion won through a PRS-linked rights offering in August 2025, it remains unable to avoid an operating cash flow deficit of of 136.7 billion won in the first half of 2026, failing to escape a negative operating cash flow. Its net debt stood at 1.15 trillion won, and its debt-to-equity ratio surged by 83 percentage points compared to the end of 2025, reaching 152%.” In addition to the continued outflow of operating cash flow, the amount subject to repayment or refinancing within one year has surged from approximately 600 billion won to 1.25 trillion won; however, cash and cash equivalents amount to only 240 billion won, the current ratio is low, and the credit rating has been downgraded.
He stated, “We believe that a merger by absorption will enable stable funding and reduced financing costs based on SK Innovation’s creditworthiness, while also allowing for the streamlining of the business structure,” adding, “This merger decision is a necessary but painful measure to preemptively prevent the risk of default—which could arise from maintaining an independent legal entity—from spreading to and amplifying business and financial risks across the entire SK Innovation group.”
The stock price appears to have already factored in the expansion of medium- to long-term risks. Analyst Yoon noted, “Although the dilution ratio resulting from the absorption merger of SKIET is only 2.6% and there will be no significant changes in the consolidated financial statements, the stock price closed down 11% yesterday.” He explained, “This is due to: △ the additional recognition of SKIET’s non-controlling interest loss △ the potential for a settlement of differences and a buyout payment of 200 to 300 billion won related to the PRS contract in August 2025 △ the fact that SKIET’s target date for returning to profitability has been set for 2029, raising the possibility of additional losses or increased risk of cash injections in 2027–28 △the potential for additional cash burdens or equity dilution arising from the future divestment of SK On’s 10.67% external stake.”
He pointed out, “When SK On and SKIET were spun off, SK Innovation’s existing shareholders were not granted the right to receive shares in the spun-off entities, and the increase in corporate value resulting from SKIET’s IPO was not fully reflected in SK Innovation’s stock price due to the dual-listing discount.” He added, “Conversely, SK Innovation has now been forced to shoulder the slump in the separator business and financial risks once again in the form of dilution from new shares and financial burdens.”