SK Gas(018670) will absorb and merge its propane dehydrogenation (PDH) business subsidiary SK Advanced. The plan is to integrate the value chain from propane procurement to propylene production and sales under a single management system to boost business and financial efficiency.
SK Gas said on the 26th that it held a board meeting and approved a proposal to sign a merger agreement with SK Advanced. SK Advanced is a subsidiary in which SK Gas effectively owns 100% equity. The merger will proceed without issuing new shares. There will be no change in the equity ratios of existing SK Gas shareholders.
The core of this merger is to integrate the propane–propylene value chain into a single management system. SK Gas procures and supplies propane overseas. SK Advanced produces propylene, a basic petrochemical feedstock, through the PDH process.
An SK Gas official said, "We reviewed the business economics not only of SK Advanced's standalone business but also from the perspective of the integrated value chain that runs from propane procurement and supply to propylene production and sales," and added, "We judged that integrating the two companies under a single management system would be effective in maximizing business and financial efficiency."
After the merger, the plan is to centralize decision-making across the business, including raw material procurement and product production and sales. The company also expects to reduce financing expenses by centralizing funding and financial management.
SK Advanced posted an operating loss of 140 billion won and a net loss of 245 billion won on a standalone basis last year. Due to oversupply from China, losses continued for four consecutive years, and the liability ratio jumped into the 400% range. Its credit rating is BBB+, with a "negative" outlook.