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SK Group plans to invest $700 million to acquire a stake in MMX, a Brazilian resources developer, to secure a stable supply of iron ore. SK signed the investment contract on Thursday with MMX's parent firm EBX Group. Under the contract, SK Networks will acquire $700 million out of $2.15 billion new shares of MMX through SK Networks. SK Networks is said to be planning to acquire the funds for the contract through Korea Exim Bank's natural resources development credit.

With the latest deal, SK Networks is now set to acquire about 10 million metric tons of iron ore on an annual basis. Earlier this year the company signed a contract to buy 1 million tons of iron ore per year for 10 years with Canada's CLM. In a separate event, SK Group's energy arm SK Energy Co.'s proposal to spin-off its two business divisions of refineries and chemical production will be approved at a board of directors meeting held in Shanghai.

The company will focus on energy exploration and R&D after the two units are established as wholly owned subsidiaries, it said.
Its former division in charge of producing lubricants was spun-off last September. The latest plans will leave SK Energy with businesses that account for a little more than 2.3 percent of its current revenues.

According to the regulatory filing for the first half of the year, SK Energy's refinery business accounted for 68 percent of its sales for the period, while chemicals took up 29.7 percent.The plans for its refinery and chemical businesses are the latest moves from SK Energy to separate from its departments, known as company-in-company. The first move came last September, when the company established the division in charge of lubricants as the wholly owned subsidiary SK Lubricants Co.

So far the company's plans to set up in-house divisions as separate subsidiaries appear to be paying off. SK Lubricants' second quarter revenues came in at more than 50 million won ($44,000) higher than that of the final quarter of last year, while net profits have more than doubled over the same period. For shareholders, analysts say that little will change. Analysts said that while the profits of the parent firm SK Energy will rely on a small number of businesses, the overall profit structure will be unchanged as the subsidiaries will all be 100 percent owned by SK Energy. "There will be no financial changes to the company," said IBK Investment and Securities analyst Park Young-hoon.

By Choi He-suk (cheesuk@heraldm.com)



# The Korea Herald [SEPTEMBER 30 2010]