(News Focus) SK chairman’s ‘most expensive divorce suit’ feared to affect conglomerate’s governance

The "most expensive divorce suit" in South Korea's history between SK Chairman Chey Tae-won and his estranged wife, Roh So-young, is feared to affect Chey's grip on SK Group's governance as questions arise over how he can pay such a huge alimony. Last week, an appellate court ordered Chey to pay 1.38 trillion won (US$1 billion) in property division to Roh, the only daughter of former President Roh Tae-woo. The couple married in 1988 and have three children. While the Supreme Court's ruling is still pending, experts are concerned that if the ordered amount is divided as the appellate court ruled, it could shake up the governance of SK Group, the second-largest conglomerate in Korea. The court ruled that Chey's SK shares were subject to division and recognized late President Roh's slush fund worth 30 billion won and contributions to SK Group's increased value and business activities. The combined property of Chey and Roh was determined to be 4 trillion won, with a division rate of 65 percent for Chey and 3 5 percent for Roh. The court ordered Chey to pay the divided sum in cash. Some speculate that Chey might need to sell his shares in SK Inc., the holding company of SK Group, which includes SK Telecom Co., SK Innovation Co. and SK Square Co., to meet the payment. Chey is the largest shareholder of SK, holding 17.73 percent, worth 2.2 trillion won, through which he controls other SK Group affiliates. Following the court's ruling Thursday, SK shares rose 9.26 percent on the day and 11.45 percent the following day, increasing the company's market capitalization by 2.3 trillion won to 12.9 trillion won. However, insiders believe Chey is unlikely to sell his stake in SK due to the governance structure and the importance of his shares within the group. Instead, Chey is expected to raise part of the funds through cash and real estate sales, with the remainder coming from the sale of a stake in the privately held SK Siltron Co. and loans. The Supreme Court decision could take two to three years, as Chey has anno unced his intention to appeal, giving him more time to arrange the amount of the division. Some analysts suggest the stake sale could align with recent reorganization efforts within the group, led by Chey's cousin, Chey Chang-won, chairman of SK Supex Council, the group's highest decision-making body. Moreover, the court's ruling recognized dubious politics-business collusion, dealing a significant blow to SK Group and Chey, who also serves as the head of the Korea Chamber of Commerce and Industry, a major South Korean business lobby. There is a perception that Sunkyung Group, the predecessor of SK Group, advanced significantly after entering the mobile phone business, partly due to former President Roh's influence following his marriage to Roh in 1988. "The business community's image as a whole has been tarnished, as the court acknowledged that SK Group had grown through 'marriage diplomacy' and benefited from former President Roh's influence," a business insider said. Source: Yonhap News Agency