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Billion-Dollar Divorce Drama Around South Korea’s SK Group Continues

The divorce case involving Chey Tae-won could reshape the governance of one of South Korea’s largest conglomerates.

Tae-jun Kang
Billion-Dollar Divorce Drama Around South Korea’s SK Group Continues
Credit: Pixabay

Asia’s biggest divorce settlement, involving more than $1 billion, took a new turn as Roh Soh-yeong, the wife of Chey Tae-won, South Korean conglomerate SK Group’s chairman, has expressed her will to keep the marriage intact in the latest trial.

Roh originally filed a lawsuit in December last year demanding 42.3 percent of Chey’s stake in SK Holdings after Chey had sought a divorce settlement mediated by the courts in 2017. The couple failed to reach an agreement in mediation, and the case went back to court.

Chey revealed in 2015 that he had a child born out of wedlock and expressed his intention to split from Roh.

In the trial held on April 7, however, Roh said she was willing to withdraw the lawsuit — and also accept her husband’s child as a family member — if Chey “comes back to the family.” Chey did not attend the trial.

Many international media outlets flocked to report on their divorce settlement with eye-catching headlines such as “billionaire divorce drama.” But the story bears watching for reasons well beyond gossip.

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That is because the settlement, if finalized, would entail a significant change in SK Group’s corporate governance structure, which also would have a great impact on businesses belonging to the third-largest conglomerate in South Korea.

As of 2019, Chey held 18.44 percent, or 12.97 million shares, of SK Group. Roh’s demand for 42.3 percent is equivalent to about 7.7 percent of the group’s shares.

If the court accepts Roh’s request, she will become the second-largest shareholder with a 7.7 percent stake in SK, while Chey’s stake will be lowered to 10.64 percent.

SK Group controls SK Innovation and SK Telecom, the group’s flagship companies, while having affiliates in many different sectors both in South Korea and overseas. SK Hynix, a leading global semiconductor manufacturer, is a subsidiary of SK Telecom, for instance.

Having major shares in the group would give Roh some level of control over those affiliates. She could, for example, express her opposition to various agenda items at shareholders’ meetings, leading to proposals being rejected.

Some believe, however, that if the settlement is finalized this could be a new opportunity for Chey and the group to innovate the group’s structure and businesses. Choi Nam-gone, a researcher at Yuanta Securities Korea, has made that argument.

If he has to cede shares to Roh, Chey could take various measures to protect the voting rights of the group and its affiliates, including purchasing shares, and make an effort to improve corporate value for the purpose of defending management rights, said Choi.

This could boost the firm’s performances and result in higher share prices, but it is also important to note that competition for shares to secure control of the board of directors could follow, Choi added.

Not all agree with Choi. Some believe Chey wouldn’t seek corporate changes even if Roh becomes the second-largest shareholder, because Chey could still exercise enough clout within the firm through other shareholders, who are either his family members or close aides.

For instance, Chey’s younger sister Choi Ki-won, chairman of the SK Happiness Sharing Foundation, holds a 6.85 percent stake , his younger brother Choi Jae-won 2.36 percent, and SK Networks Chairman Choi Shin-won 0.09 percent, respectively. Many believe this could give Chey enough support and management power.

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Of course, it will depend on how much the court recognizes Roh’s contribution to the formation of Chey’s wealth, which is expected to be the biggest issue.

In principle, the division of assets when divorcing is calculated based on the size of assets accumulated together after marriage. Chey is expected to claim that his shares in the firm were inherited from his predecessor, while Roh is likely to claim that she contributed to increasing the value of those shares and the company.

Legal experts are also divided over the case. Some believe that the court is unlikely to accept Roh’s request because she is not entitled to inherited assets, while others say the fact that the two have been married more than 30 years cannot be easily ignored.

As mentioned above, the fact that Roh expressed her will to maintain the marriage at the latest trial also could be a game-changer. In response, Chey’s lawyer said on April 9 that Roh is “playing a game.”

Like it or not, the “billionaire divorce drama” is likely to continue for a while.