■ ISS expects financial stability and business synergies from the merged company

■ Glass Lewis said the merger is expected to mitigate global business environment uncertainties

According to industry sources on the 14^th, ISS (Institutional Shareholder Service) and Glass Lewis, have thrown their weight behind the merger of SK Innovation and SK E&S, garnering support from shareholders and investors. This backing is anticipated to propel the scheduled merger on the 27^th to greater heights. ISS, the foremost global proxy advisory agency serving over 90% of institutional investors globally, and Glass Lewis, have both expressed support for the merger in their recent reports, citing expectations of enhanced financial stability, creation of business synergies, and mitigation of uncertainties in the global business environment.

These two global proxy advisory firms evaluated that the merger would help create a stable earnings structure, strengthen the financial structure, and build a portfolio encompassing current and future energy, thus deeming the merger’s purpose, and expected effects sufficient.

In particular, the two agencies commented on the fairness of the merger ratio and the fairness of the company valuation, stating that legal requirements were followed, and the company valuation was fair.

Specifically, Glass Lewis pointed out that as the market value of SK Innovation has been traded at a significantly lower price compared to its asset value since 2022, using the market value in this merger would properly reflect SK Innovation’s corporate value. It also suggested that if the merger ratio had been calculated based on SK Innovation’s book value, the merger might not have been approved due to objections from the counterparty.

ISS explained that considering the level at which similar domestic industries are evaluated in the market, the corporate value of SK E&S is sufficiently justifiable. Moreover, it stated that the fair evaluation of the corporate value had reasons such as being able to directly benefit from the perspective of earnings per share through the merger with SK E&S.

Glass Lewis also expressed its belief that the merger between the two companies would enhance the profitability of the SK Innovation group and strengthen its financial stability, even amid the uncertainties in the rapidly evolving global business environment and the energy transition process. As evidence, it cited the recent upward revision by S&P Global, which adjusted SK Innovation’s credit rating and outlook from “Stable (BB+)” to “BB+ Credit Watch Positive” since the announcement of the merger.

Additionally, Glass Lewis added that concerns about the issue of SK E&S’s Redeemable Convertible Preference Shares (RCPS) have been sufficiently addressed. It pointed out that the recent changes in the RCPS terms were not made with immediate redemption intentions and that the method of future redemption (in kind or in cash) also reasonably takes place according to board decisions.