SK Innovation Co. announced it will combine its loss-making electric vehicle battery unit SK On with lubricant supplier SK Enmove, marking another attempt by South Korea’s second-largest conglomerate to restore profitability to its struggling electrification business.
The merger, set to launch Nov. 1, will be followed by an 8 trillion won ($5.8 billion) capital injection through rights offerings, perpetual bond issues and derivative product sales. The energy company also plans to divest 1.5 trillion won worth of non-core assets within the year.
The restructuring underscores the mounting pressure on Korean battery manufacturers as disappointing EV sales in Europe and the U.S. have led to consecutive losses. SK On has reported losses for 10 straight quarters since spinning off from its parent in 2021, with net debt ballooning from 2.9 trillion won to 15.6 trillion won.
SK On holds approximately 4.4% of the global EV battery market, ranking fifth behind Chinese giants CATL and BYD. The company declared “emergency management” in July as CEO Lee Seok-hee acknowledged having “our back against the wall”.
The deal brings together SK On’s battery operations with SK Enmove’s base oil and lubricant business, which has expanded into EV thermal management and data center cooling solutions. SK Innovation expects synergies from offering package deals to automotive clients, though skeptics question whether combining a profitable lubricant business with a struggling battery operation addresses fundamental market challenges.
The proceeds will help SK Innovation repurchase 3.59 trillion won worth of convertible preferred shares held by financial investors including MBK Partners, BlackRock and Qatar Investment Authority, who invested 2.8 trillion won in 2023 expecting an initial public offering by 2026.
The restructuring reflects broader struggles in the Korean battery sector, where manufacturers have lost nearly a quarter of their European market share over the past two years as Chinese competitors leverage cost advantages and scale.
